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Fear Regimes in DeFi: A Study of Investor Behavior and Market Dynamics

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  • Gergana Taneva-Angelova

    (Department of Finance and Accounting, University of Plovdiv "Paisii Hilendarski")

  • Stefan Raychev

    (Department of Economic Sciences, University of Plovdiv "Paisii Hilendarski")

Abstract

The aim of this study is to analyze how fear affects investor behavior in decentral-ized financial (DeFi) markets. The focus is on the relationship between the Fear and Greed Index (F&G) and the market prices of governance tokens from major DeFi platforms, including PancakeSwap, Balancer, Compound, SushiSwap, Uniswap, Aave, and MakerDAO. Each of these tokens is a native asset linkedto a specific DeFi protocoland, beyond their tradability, they function as governance instruments, making them particularly sensitive to shifts in market sentiment and investor expectations. To examine how investor fear and greed impact token price dy-namics, we apply a combination of econometric and behavioral approaches. Our findings suggest that while investor sentiment may influence volatility and regime shifts, its direct predictive power over daily returns of governance tokens remains weak.

Suggested Citation

  • Gergana Taneva-Angelova & Stefan Raychev, 2025. "Fear Regimes in DeFi: A Study of Investor Behavior and Market Dynamics," Financial Navigator Journal (selected edition), University of Economics Varna, issue 1, pages 36-46.
    • Handle: RePEc:vrn:cfinrd:y:2025:i:1:p:36-46
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