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Bitcoin price volatility: Effects of retail traders, illegal users, and sentiment

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  • John, Kose
  • Li, Jingrui

Abstract

In this paper, we study the determinants of Bitcoin volatility. We estimate and decompose Bitcoin's realized volatility into jump volatility and continuous volatility components. We find that innovations in Robinhood retail trading are positively related to the continuous component of Bitcoin's volatility. Specifically, the innovations in Robinhood retail trading predict an increase in future ten-day continuous volatility. The innovations in the (anonymous) trading volume of Monero are also positively related to the jump component in Bitcoin's volatility. Specifically, the innovations in Monero trading volume predict an increase in average jump volatility over the next five days. Our results suggest that retail trading positively influences the continuous component of Bitcoin volatility, while the preference for transaction anonymity positively affects the jump component of Bitcoin volatility.

Suggested Citation

  • John, Kose & Li, Jingrui, 2025. "Bitcoin price volatility: Effects of retail traders, illegal users, and sentiment," Journal of Corporate Finance, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:corfin:v:94:y:2025:i:c:s0929119925001051
    DOI: 10.1016/j.jcorpfin.2025.102837
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G40 - Financial Economics - - Behavioral Finance - - - General

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