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News sentiment in the cryptocurrency market: An empirical comparison with Forex

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  • Rognone, Lavinia
  • Hyde, Stuart
  • Zhang, S. Sarah

Abstract

We use high frequency intra-day data to investigate the influence of unscheduled currency and Bitcoin news on the returns, volume and volatility of the cryptocurrency Bitcoin and traditional currencies over the period from January 2012 to November 2018. Results show that Bitcoin behaves differently to traditional currencies. Traditional currencies typically experience a decrease in returns after negative news arrivals and an increase in returns following positive news whereas Bitcoin reacts positively to both positive and negative news. This suggests investor enthusiasm for Bitcoin irrespective of the sentiment of the news. This phenomenon is exacerbated during bubble periods. Conversely, cryptocurrency cyber-attack news and fraud news dampen this effect, decreasing Bitcoin returns and volatility. Our results contribute to the discussion on the nature of Bitcoin as a currency or an asset. They further inform practitioners about the characteristics of cryptocurrencies as a financial asset and inform regulators about the influence of news on Bitcoin volatility, particularly during bubble periods.

Suggested Citation

  • Rognone, Lavinia & Hyde, Stuart & Zhang, S. Sarah, 2020. "News sentiment in the cryptocurrency market: An empirical comparison with Forex," International Review of Financial Analysis, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:finana:v:69:y:2020:i:c:s105752192030106x
    DOI: 10.1016/j.irfa.2020.101462
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    More about this item

    Keywords

    Digital currencies; Cryptocurrency; Bitcoin; News sentiment; Foreign exchange;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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