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The determinants of positive feedback trading behaviors in Bitcoin markets

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  • Wang, Jying-Nan
  • Lee, Yen-Hsien
  • Liu, Hung-Chun
  • Lee, Ming-Chih

Abstract

This study investigates the positive feedback trading behavior in Bitcoin markets and analyzes its potential determinants. Our results show significant evidence of positive feedback trading behaviors for Bitcoin and the infectious disease equity market volatility tracker index (EMVID) increases Bitcoin volatility. Combining rolling window estimations with regression analysis, we find that market uncertainty that is measured by EMVID, the distance between short- and long-term moving averages of Bitcoin's trading volumes, and Bitcoin prices exceeding their 21-day moving average are positively correlated with future positive feedback trading behaviors during the COVID-19 pandemic. Further, left-tailed risk contributes negatively to this behavioral anomaly.

Suggested Citation

  • Wang, Jying-Nan & Lee, Yen-Hsien & Liu, Hung-Chun & Lee, Ming-Chih, 2022. "The determinants of positive feedback trading behaviors in Bitcoin markets," Finance Research Letters, Elsevier, vol. 45(C).
    • Handle: RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321002014
    DOI: 10.1016/j.frl.2021.102120
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    Cited by:

    1. David G. Green, 2023. "Emergence in complex networks of simple agents," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 18(3), pages 419-462, July.
    2. Wang, Jying-Nan & Liu, Hung-Chun & Lee, Yen-Hsien & Hsu, Yuan-Teng, 2023. "FoMO in the Bitcoin market: Revisiting and factors," The Quarterly Review of Economics and Finance, Elsevier, vol. 89(C), pages 244-253.
    3. Ştefan Cristian Gherghina & Liliana Nicoleta Simionescu, 2023. "Exploring the asymmetric effect of COVID-19 pandemic news on the cryptocurrency market: evidence from nonlinear autoregressive distributed lag approach and frequency domain causality," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-58, December.

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    More about this item

    Keywords

    Bitcoin; Positive feedback trading; COVID-19; EMVID; Moving average;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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