IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0304377.html

The reversal in the cryptocurrency market before and during the Covid-19 pandemic: Does investor attention matter?

Author

Listed:
  • Huy Pham
  • Trang Ngoc Doan Tran
  • Ngoc Thi Thanh Nguyen
  • Khoa Dang Duong

Abstract

This study delves into the impact of reversals and investor attention on cryptocurrency returns before and during the COVID-19 pandemic. We employ the Two Stages Least Squares to analyze a sample of the top 20 cryptocurrencies from January 2016 to April 2021. Our results reveal that investor attention positively influences bitcoin returns in both periods, with a more pronounced effect during the pandemic. Conversely, reversals demonstrate a positive correlation with cryptocurrency returns before the outbreak but a negative relationship during the pandemic. Our robustness test further indicates that investor attention positively affects the returns of small and medium-cap cryptocurrencies, while reversals only exhibit positive consequences for small-cap cryptocurrencies. Additionally, our findings highlight stablecoins as a safe haven during the epidemic. The results suggest that investor attention has little influence on the returns of stablecoins, indicating that these coins are primarily resistant to market sentiment due to their inherent stability. The negative impact of the pandemic on the crypto market demonstrates a downward trend through each wave. Despite aligning with attention-induced price pressure and behavioral finance hypotheses, our results do not support efficient market theory or the notion of heterogeneity among investors. This research provides valuable insights for investors and policymakers in devising effective strategies for the cryptocurrency market.

Suggested Citation

  • Huy Pham & Trang Ngoc Doan Tran & Ngoc Thi Thanh Nguyen & Khoa Dang Duong, 2024. "The reversal in the cryptocurrency market before and during the Covid-19 pandemic: Does investor attention matter?," PLOS ONE, Public Library of Science, vol. 19(11), pages 1-23, November.
    • Handle: RePEc:plo:pone00:0304377
    DOI: 10.1371/journal.pone.0304377
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0304377
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0304377&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0304377?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Hung, Weifeng & Yang, J. Jimmy, 2018. "The MAX effect: Lottery stocks with price limits and limits to arbitrage," Journal of Financial Markets, Elsevier, vol. 41(C), pages 77-91.
    2. Susovon Jana & Tarak Nath Sahu & Krishna Dayal Pandey, 2024. "Revisiting the cryptocurrencies role in stock markets: ADCC-GARCH and Wavelet Coherence," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 17(1), pages 110-135, January.
    3. Khoa Dang Duong & Qui Nhat Nguyen & Truong Vinh Le & Diep Van Nguyen, 2021. "Limit-To-Arbitrage Factors And Ivol Returns Puzzle: Empirical Evidence From Taiwan Before And During Covid-19," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 16(01), pages 1-18, March.
    4. Zhi Da & Joseph Engelberg & Pengjie Gao, 2011. "In Search of Attention," Journal of Finance, American Finance Association, vol. 66(5), pages 1461-1499, October.
    5. Renault, Thomas, 2017. "Intraday online investor sentiment and return patterns in the U.S. stock market," Journal of Banking & Finance, Elsevier, vol. 84(C), pages 25-40.
    6. Urquhart, Andrew, 2018. "What causes the attention of Bitcoin?," Economics Letters, Elsevier, vol. 166(C), pages 40-44.
    7. Susovon Jana & Tarak N. Sahu, 2023. "Is the cryptocurrency market a hedge against stock market risk? A Wavelet and GARCH approach," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 52(3), November.
    8. Thomas Renault, 2017. "Intraday online investor sentiment and return patterns in the U.S. stock market," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03205113, HAL.
    9. Eom, Cheoljun & Park, Jong Won, 2020. "Effects of the fat-tail distribution on the relationship between prospect theory value and expected return," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    10. Zhen Cao & Osman Kilic & Xuewu (Wesley) Wang, 2021. "Investor Attention, Divergence of Opinions, and Stock Returns," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 22(3), pages 265-279, July.
    11. Shen, Dehua & Urquhart, Andrew & Wang, Pengfei, 2020. "A three-factor pricing model for cryptocurrencies," Finance Research Letters, Elsevier, vol. 34(C).
    12. Conghui Chen & Lanlan Liu & Ningru Zhao, 2020. "Fear Sentiment, Uncertainty, and Bitcoin Price Dynamics: The Case of COVID-19," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(10), pages 2298-2309, August.
    13. Li, Yi & Lucey, Brian & Urquhart, Andrew, 2023. "Can altcoins act as hedges or safe-havens for Bitcoin?," Finance Research Letters, Elsevier, vol. 52(C).
    14. Melisa Ozdamar & Levent Akdeniz & Ahmet Sensoy, 2021. "Lottery-like preferences and the MAX effect in the cryptocurrency market," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-27, December.
    15. Sowmya Subramaniam & Madhumita Chakraborty, 2020. "Investor Attention and Cryptocurrency Returns: Evidence from Quantile Causality Approach," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 21(1), pages 103-115, January.
    16. Ugolini, Andrea & Reboredo, Juan C. & Mensi, Walid, 2023. "Connectedness between DeFi, cryptocurrency, stock, and safe-haven assets," Finance Research Letters, Elsevier, vol. 53(C).
    17. Hu, Yang & Valera, Harold Glenn A. & Oxley, Les, 2019. "Market efficiency of the top market-cap cryptocurrencies: Further evidence from a panel framework," Finance Research Letters, Elsevier, vol. 31(C), pages 138-145.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Janesh Sami, 2026. "Nonlinear Causality Analysis of Bitcoin Returns and COVID-19 Pandemic," Computational Economics, Springer;Society for Computational Economics, vol. 67(1), pages 485-509, January.
    2. Abd Rabbo, Fatima & Disli, Mustafa, 2025. "Style investing and return comovement in the cryptocurrency market," Research in International Business and Finance, Elsevier, vol. 77(PB).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dias, Ishanka K. & Fernando, J.M. Ruwani & Fernando, P. Narada D., 2022. "Does investor sentiment predict bitcoin return and volatility? A quantile regression approach," International Review of Financial Analysis, Elsevier, vol. 84(C).
    2. Rui Fan & Oleksandr Talavera & Vu Tran, 2023. "Social media and price discovery: The case of cross‐listed firms," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 46(1), pages 151-167, February.
    3. Fan, Rui & Talavera, Oleksandr & Tran, Vu, 2023. "Information flows and the law of one price," International Review of Financial Analysis, Elsevier, vol. 85(C).
    4. Szymon Lis, 2022. "Investor Sentiment in Asset Pricing Models: A Review," Working Papers 2022-14, Faculty of Economic Sciences, University of Warsaw.
    5. Lyócsa, Štefan & Halousková, Martina & Haugom, Erik, 2023. "The US banking crisis in 2023: Intraday attention and price variation of banks at risk," Finance Research Letters, Elsevier, vol. 57(C).
    6. José Almeida & Tiago Cruz Gonçalves, 2024. "Cryptocurrency market microstructure: a systematic literature review," Annals of Operations Research, Springer, vol. 332(1), pages 1035-1068, January.
    7. Yu, Jing-Rung & Chiou, W. Paul & Hung, Cing-Hung & Dong, Wen-Kuei & Chang, Yi-Hsuan, 2022. "Dynamic rebalancing portfolio models with analyses of investor sentiment," International Review of Economics & Finance, Elsevier, vol. 77(C), pages 1-13.
    8. Martina Halouskov'a & Daniel Stav{s}ek & Mat'uv{s} Horv'ath, 2022. "The role of investor attention in global asset price variation during the invasion of Ukraine," Papers 2205.05985, arXiv.org, revised Aug 2022.
    9. Aigbe Akhigbe & Melinda Newman & Ann Marie Whyte, 2022. "Localized sentiment trading in heterogeneous labor markets: evidence from free agent signings," Review of Quantitative Finance and Accounting, Springer, vol. 58(3), pages 1249-1276, April.
    10. Bui, Mai & Pham, Huy & Nguyen Thanh, Binh & Tiwari, Aviral Kumar, 2024. "Revisiting the determinants of cryptocurrency excess return: Does scarcity matter?," International Review of Economics & Finance, Elsevier, vol. 96(PC).
    11. Guégan, Dominique & Renault, Thomas, 2021. "Does investor sentiment on social media provide robust information for Bitcoin returns predictability?," Finance Research Letters, Elsevier, vol. 38(C).
    12. Daniele Ballinari & Simon Behrendt, 2021. "How to gauge investor behavior? A comparison of online investor sentiment measures," Digital Finance, Springer, vol. 3(2), pages 169-204, June.
    13. Chen, Rongda & Wu, Ling & Jin, Chenglu & Wang, Shengnan, 2021. "Unintended investor sentiment on bank financial products: Evidence from China," Emerging Markets Review, Elsevier, vol. 49(C).
    14. Caiming Nie & Yang Gao & Ting Ren, 2025. "The impact of social media on fund net capital flow and performance," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-14, December.
    15. Ding, Rui & Guo, Jintong & Zhang, Min, 2024. "Practice a poker face: Manager emotion and investor sentiment," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    16. Maître, Arnaud T. & Pugachyov, Nikolay & Weigert, Florian, 2025. "Social media-based attention and the cross-section of cryptocurrency returns," Journal of Banking & Finance, Elsevier, vol. 178(C).
    17. Geng, Yuedan & Ye, Qiang & Jin, Yu & Shi, Wen, 2022. "Crowd wisdom and internet searches: What happens when investors search for stocks?," International Review of Financial Analysis, Elsevier, vol. 82(C).
    18. Chen, Conghui & Liu, Lanlan, 2022. "How effective is China's cryptocurrency trading ban?," Finance Research Letters, Elsevier, vol. 46(PB).
    19. Bashir, Hajam Abid & Kumar, Dilip, 2025. "Unveiling investor sentiment, attention, and speed of price adjustment in Indian market," International Review of Economics & Finance, Elsevier, vol. 101(C).
    20. Dumrongwong, Konpanas & Papangkorn, Suwongrat, 2025. "Happiness and IPO performance," Journal of Behavioral and Experimental Finance, Elsevier, vol. 46(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0304377. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.