Attention-Driven Negative Spillovers Across Crypto Blockchains

Summary

The document examines how crypto asset returns across five blockchain ecosystems move in relation to one another. It reports that sharp gains on one chain are often accompanied by losses on others, a pattern that differs from the positive co-movement often seen among equities. The analysis uses on-chain observations spanning 2022 to 2025 and accounts for broad equity returns, interest rates, and Bitcoin.

The authors attribute the inverse relationships to attention-driven shifts of capital between chains rather than shared information. They report that spillovers grow stronger around increases in chain activity and unusually large return moves, and use nonlinear factor models to investigate these mechanisms. The findings suggest that diversification and systemic risk assessments may need to account for competition for investor attention. The account is limited to the chains, period, proxies, and modeling approach studied; it provides no detailed effect sizes or evidence that the proposed mechanism applies to every crypto market episode.

Key ideas

• Returns across the examined blockchain ecosystems often move in opposite directions.
• The analysis uses on-chain data from 2022 through 2025 and controls for several broad market factors.
• Negative cross-chain spillovers become stronger during periods of elevated activity or extreme returns.
• The authors link the pattern to attention-driven capital shifts between chains rather than shared information.
• Cross-chain substitution may affect how investors assess diversification and systemic risk.

Tags

# One Rising Ship Sinks Other Ships: Cross-Chain Negative Spillovers in Crypto Markets


# One Rising Ship Sinks Other Ships: Cross-Chain Negative Spillovers in Crypto Markets









We document the first systematic evidence of negative spillover effects in crypto asset returns across blockchains. Using on-chain data from Ethereum, Solana, Binance Smart Chain, Arbitrum, and Avalanche (2022-2025), we show that surges on one chain often coincide with declines on others, in contrast to the positive co-movements typical of equity markets. These spillovers intensify during attention shocks, proxied by chain activity and extreme return events, and persist after controlling for global equity returns, interest rates, and Bitcoin. Nonlinear factor models reveal that attention-driven capital reallocation, rather than common information, underlies these dynamics. Our findings introduce a new form of cross-market linkage, attention-induced substitution, that shapes risk transmission in crypto markets. The results carry implications for portfolio diversification, systemic risk measurement, and regulation of token launches that may trigger cross-chain capital flight.

Shown in full with attribution under the source's licence. Licence: abstract CC0

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.