Will memecoins' surge trigger a crypto crash? Evidence from the connectedness between leading cryptocurrencies and memecoins

Understanding the crash of cryptocurrencies in 2021 requires analyses of the microstructure of leading cryptocurrencies and memecoins. Using 4-hourly data, we reveal how leading crypto-currencies and memecoins influence each other with the Granger-causality test and dynamic connectedness. We find that leading cryptocurrencies spillovers dominate memecoins by falling while memecoins spillovers affect leading cryptocurrencies by rising. Moreover, we conduct regression analysis on a daily and 4-hourly basis, and the results confirm the findings above. In most periods, leading cryptocurrencies drive memecoins; however, when memecoins show a positive net spillover, it tends to trigger the leading cryptocurrencies to crash.