Analysis Of The Contagion Effect Between The Cryptocurrency Market And The Indonesian Stock Market
Keywords:
contagion; cryptocurrency; Indonesian stock market; DCC GARCH; spillover index; financial crisisAbstract
This study analyzes whether financial crises are transmitted between the cryptocurrency market and the Indonesian stock market through contagion, defined as a significant increase in cross market linkages after a shock, or merely through normal interdependence. Using daily returns of Bitcoin (BTC), Ethereum (ETH), the Jakarta Composite Index (JCI), and the IDX technology sector index (IDXTECHNO) from 3 January 2018 to 30 June 2026, the study examines three crises: the COVID crash of 2020, which originated in traditional markets, and the Terra (LUNA) and FTX collapses of 2022, which originated in the crypto market. Three complementary methods are used: the adjusted correlation test of Forbes and Rigobon (2002), the dynamic conditional correlation (DCC) GARCH model, and the spillover index of Diebold and Yilmaz (2012). The results show that during the COVID crash, the shock from the stock market spread to the crypto market, with significant contagion to Ethereum and weak contagion to Bitcoin even after correcting for heteroskedasticity. During the crypto crises, contagion did not reach the broad Indonesian market: correlations between crypto and the JCI declined. The technology sector, however, experienced significant contagion during the Terra (LUNA) collapse and a sharp rise in dynamic correlation during both crypto crises. The total spillover index averages 29.2%, with crypto assets acting as net transmitters and Indonesian stocks as net receivers, and it rises markedly after each crisis. The findings indicate that crypto shocks are transmitted selectively to the Indonesian technology sector rather than to the market as a whole.
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