In November 2022, cryptocurrency exchange FTX collapsed following reports of potential leverage and solvency issues. The collapse reverberated throughout the cryptocurrency market, sparking volatility in an already unstable space.

The event gained widespread attention, not just due to the magnitude of investor losses, but the audacity of identified breaches of corporate governance and the public trust. As investor interest in cryptocurrencies has grown, there are reasonable concerns regarding contagion to traditional markets. The collapse of the FTX exchange presents a unique opportunity to examine such contagion channels, directly corresponding to areas of recent finance scholarly interest.

Employing a TVP-VAR dynamic connectedness analysis, we identify avenues through which the collapse of the FTX exchange manifested contagion effects throughout a number of financial markets. Results indicate that interaction effects become significantly pronounced, coinciding with key milestones during the collapse of FTX and related companies. Such results further develop the expanding literature based on the inherent contagion effects of such unregulated products.