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Is Bitcoin rooted in confidence? – Unraveling the determinants of globalized digital currencies

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  • Gaies, Brahim
  • Nakhli, Mohamed Sahbi
  • Sahut, Jean Michel
  • Guesmi, Khaled

Abstract

Although previous studies have shown the impact of sentiment on Bitcoin price, they have not produced clear and consistent empirical results regarding two main questions: how is sentiment measured and what are its effects on Bitcoin price over time? To address this gap, we develop an innovative empirical approach based on Bitcoin sentiment, drawing on trade data rather than judgments of individuals who are not actual Bitcoin users, as well as on the autoregressive distributed lag model and the nonlinear autoregressive distributed lag model, both of which capture the asymmetric effects of explanatory variables. In addition to revealing a significant impact of the Bitcoin Misery Index (BMI) on short- and long-term Bitcoin returns, this paper highlights the nonlinearity and asymmetry of this relationship in the short and long run, as well as the relevance of estimating Bitcoin sentiment using trade data.

Suggested Citation

  • Gaies, Brahim & Nakhli, Mohamed Sahbi & Sahut, Jean Michel & Guesmi, Khaled, 2021. "Is Bitcoin rooted in confidence? – Unraveling the determinants of globalized digital currencies," Technological Forecasting and Social Change, Elsevier, vol. 172(C).
    • Handle: RePEc:eee:tefoso:v:172:y:2021:i:c:s0040162521004704
    DOI: 10.1016/j.techfore.2021.121038
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