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When Elon Musk Changes his Tone, Does Bitcoin Adjust Its Tune?

Author

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  • Toan Luu Duc Huynh

    (University of Economics Ho Chi Minh City (UEH)
    WHU - Otto Beisheim School of Management)

Abstract

We present a textual analysis that explains how Elon Musk’s sentiments in his Twitter content correlates with price and volatility in the Bitcoin market using the dynamic conditional correlation-generalized autoregressive conditional heteroscedasticity model, allowing less sensitive to window size than traditional models. After examining 10,850 tweets containing 157,378 words posted from December 2017 to May 2021 and rigorously controlling other determinants, we found that the tone of the world’s wealthiest person can drive the Bitcoin market, having a Granger causal relation with returns. In addition, Musk is likely to use positive words in his tweets, and reversal effects exist in the relationship between Bitcoin prices and the optimism presented by Tesla’s CEO. However, we did not find evidence to support linkage between Musk’s sentiments and Bitcoin volatility. Our results are also robust when using a different cryptocurrency, i.e., Ether this paper extends the existing literature about the mechanisms of social media content generated by influential accounts on the Bitcoin market.

Suggested Citation

  • Toan Luu Duc Huynh, 2023. "When Elon Musk Changes his Tone, Does Bitcoin Adjust Its Tune?," Computational Economics, Springer;Society for Computational Economics, vol. 62(2), pages 639-661, August.
    • Handle: RePEc:kap:compec:v:62:y:2023:i:2:d:10.1007_s10614-021-10230-6
    DOI: 10.1007/s10614-021-10230-6
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    More about this item

    Keywords

    Bitcoin; Elon Musk twitter; Negative; Positive; Optimistic; Pessimistic;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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