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Does Sentiment Impact Cryptocurrency?

Author

Listed:
  • Anamika
  • Madhumita Chakraborty
  • Sowmya Subramaniam

Abstract

This study examines the impact of investor sentiment on cryptocurrency returns. We use a direct survey-based measure that captures the investors’ sentiment on Bitcoins. This direct measure of Bitcoin investor sentiment is obtained from the Sentix database. The results of the study found that the Bitcoin prices experience appreciation when investors are optimistic about Bitcoin. Bitcoin sentiment has significant power in predicting the Bitcoin prices after controlling for the relevant factors. There is also evidence that the sentiment of the dominant cryptocurrency, i.e., Bitcoin, influences the price of other cryptocurrencies. Further, we extend our analysis by investigating the impact of equity market sentiment on cryptocurrency returns. We proxy equity market sentiment using two measures viz: Baker-Wurgler sentiment Index and the VIX Index. When the equity market investors’ sentiment is bearish, cryptocurrency prices rise, indicating that cryptocurrency can act as an alternative avenue for investment. Our results remain unaffected after controlling for potential factors that could impact cryptocurrency prices.

Suggested Citation

  • Anamika & Madhumita Chakraborty & Sowmya Subramaniam, 2023. "Does Sentiment Impact Cryptocurrency?," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 24(2), pages 202-218, April.
    • Handle: RePEc:taf:hbhfxx:v:24:y:2023:i:2:p:202-218
    DOI: 10.1080/15427560.2021.1950723
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    Cited by:

    1. Superchi, Francesco & Mati, Alessandro & Carcasci, Carlo & Bianchini, Alessandro, 2023. "Techno-economic analysis of wind-powered green hydrogen production to facilitate the decarbonization of hard-to-abate sectors: A case study on steelmaking," Applied Energy, Elsevier, vol. 342(C).
    2. Elie Bouri & Matteo Foglia & Sayar Karmakar & Rangan Gupta, 2024. "Return-Volatility Nexus in the Digital Asset Class: A Dynamic Multilayer Connectedness Analysis," Working Papers 202432, University of Pretoria, Department of Economics.
    3. Srivastava, Richa & Singh, Deepak Kumar & Rana, Nripendra P., 2024. "Analysis of barriers to investment and mining in cryptocurrency for traditional and tech-savvy investors: A fuzzy approach," Technology in Society, Elsevier, vol. 77(C).
    4. Yongzhi Gong & Xiaofei Tang & En-Chung Chang, 2023. "Group norms and policy norms trigger different autonomous motivations for Chinese investors in cryptocurrency investment," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-10, December.
    5. Mercik, Aleksander & Słoński, Tomasz & Karaś, Marta, 2024. "Understanding crypto-asset exposure: An investigation of its impact on performance and stock sensitivity among listed companies," International Review of Financial Analysis, Elsevier, vol. 92(C).
    6. Chowdhury, Md Iftekhar Hasan & Hasan, Mudassar & Bouri, Elie & Tang, Yayan, 2024. "Emotional spillovers in the cryptocurrency market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 41(C).
    7. Jana, Rabin K., 2024. "Are metaverse coins more prone to geopolitical risk than traditional crypto assets?," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 436-447.
    8. Abderahman Rejeb & Karim Rejeb & Khalil Alnabulsi & Suhaiza Zailani, 2023. "Tracing Knowledge Diffusion Trajectories in Scholarly Bitcoin Research: Co-Word and Main Path Analyses," JRFM, MDPI, vol. 16(8), pages 1-23, July.

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