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What drives DeFi prices? Investigating the effects of investor attention

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  • Corbet, Shaen
  • Goodell, John W.
  • Günay, Samet

Abstract

We comparatively assess drivers of DeFi token prices, testing the impact and connectedness between Bitcoin (as a cryptocurrency asset-class leader), Ethereum (as a platform for DeFi), and Google Trends (as a signal of investor attention). While we evidence varying causal linkages between Bitcoin or Ethereum and Defi tokens, these linkages are restricted to bear markets. In contrast, restricted MS-VAR (LR) modelling uncovers bi-causal relationships between DeFi tokens and investor sentiment in both bull and bear markets. We conclude that, rather than platform valuation, investor attention is a dominant driver of DeFi prices, with DeFi being a separate asset class from mainstream cryptocurrencies.

Suggested Citation

  • Corbet, Shaen & Goodell, John W. & Günay, Samet, 2022. "What drives DeFi prices? Investigating the effects of investor attention," Finance Research Letters, Elsevier, vol. 48(C).
    • Handle: RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322001672
    DOI: 10.1016/j.frl.2022.102883
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    References listed on IDEAS

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