Middle East Conflict Impact on Cryptocurrencies' Volatility: A Comparative Analysis

Abstract

The main objective of this study is to compare the efficiency levels, in their weak form, between sustainable cryptocurrencies such as Avalanche (AVAX), Cardano (ADA), Solana (SOL), Toncoin (TON) and Ethereum (ETH) (after 'The Merge'), which use efficient mechanisms such as proof-of-stake (PoS), and Binance Coin (BNB), Litecoin (LTC), Monero (XMR), Ripple (XRP), and Bitcoin (BTC) classified as unsustainable cryptocurrencies due to their excessive energy consumption based on proof-of-work (PoW). The analysed period was from 1 January 2023 to 10 December 2024. The Detrended Fluctuation Analysis (DFA) slopes reveal a significant impact of the 2023 Conflict on cryptocurrency dynamics, with distinct effects per asset. Sustainable cryptocurrencies (AVAX, ADA, SOL) demonstrated greater resilience, maintaining persistence with a brief reduction in long memory, reflecting their relative stability and attractiveness in uncertainty scenarios. In contrast, non-sustainable cryptocurrencies (LTC, XMR) transitioned from persistence to anti-persistence, indicating greater instability and speculation, associated with lower investor confidence. Assets such as TON (white noise) and XRP (consistent persistence) were less affected, suggesting intrinsic characteristics that confer resilience. Distinguishing between sustainability and other market factors is crucial to understand behaviours and build resilient portfolios, providing valuable insights for investors and researchers.