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Emotional spillovers in the cryptocurrency market

Author

Listed:
  • Chowdhury, Md Iftekhar Hasan
  • Hasan, Mudassar
  • Bouri, Elie
  • Tang, Yayan

Abstract

Using 10 significant cryptocurrencies, we construct emotional spillovers and provide inferences about the transmission of fear and greed shocks. The results show intense emotional bonding signifying a high level of cryptocurrency interdependence through the sentiment channel of crypto traders and investors. The amplitude of idiosyncratic (own) connectedness increases significantly for most cryptocurrencies in their greed phase, implying that positive investor sentiment is more substantial than negative sentiment in driving the trading of individual cryptocurrencies. Though market conditions and the pandemic alter the role of most cryptocurrencies, some cryptocurrencies display persistence. Ethereum cash and, to some extent, Ripple remain considerably isolated, whereas Ethereum and Dash remain highly interlocked with the rest of the cryptocurrencies. Dash is the leading net transmitter, whereas Ripple is the leading net receiver of fear and greed shocks.

Suggested Citation

  • Chowdhury, Md Iftekhar Hasan & Hasan, Mudassar & Bouri, Elie & Tang, Yayan, 2024. "Emotional spillovers in the cryptocurrency market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 41(C).
    • Handle: RePEc:eee:beexfi:v:41:y:2024:i:c:s2214635023000928
    DOI: 10.1016/j.jbef.2023.100878
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    More about this item

    Keywords

    Cryptocurrencies; Emotional spillover Analysis; Fear & Greed; Time-varying parameter vector autoregression (TVP-VAR) connectedness; COVID-19;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • F10 - International Economics - - Trade - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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