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Sentiment and Bitcoin Volatility

Author

Listed:
  • Jaroslav Bukovina

    (Department of Finance, Faculty of Business and Economics, Mendel University in Brno)

  • Matus Marticek

    (Faculty of Business and Economics, Mendel University in Brno)

Abstract

This paper augments the current research suggesting the less rational factors like attractiveness of Bitcoin and speculative investments to be influential for excessive volatility. In particular, it examines the sentiment as a driver of Bitcoin volatility. The paper contributes with economic rationale about a link between sentiment and Bitcoin. Further, the authors propose a unique decomposition of Bitcoin price to rational and less rational components. The paper tests this theoretical prediction with unique sentiment intraday data in the period of 12/12/2013 – 12/31/2015. The findings of the paper show the marginal presence of sentiment during the overall studied period. However, the explanato- ry power of sentiment significantly increases during the period of excessive volatility, especially dur- ing the bubble period at the end of the year 2013 and beginning of 2014. Moreover, the findings show that positive sentiment is more influential for Bitcoin excessive volatility.

Suggested Citation

  • Jaroslav Bukovina & Matus Marticek, 2016. "Sentiment and Bitcoin Volatility," MENDELU Working Papers in Business and Economics 2016-58, Mendel University in Brno, Faculty of Business and Economics.
    • Handle: RePEc:men:wpaper:58_2016
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    References listed on IDEAS

    as
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    4. David Garcia & Claudio Tessone & Pavlin Mavrodiev & Nicolas Perony, "undated". "The digital traces of bubbles: feedback cycles between socio-economic signals in the Bitcoin economy," Working Papers ETH-RC-14-001, ETH Zurich, Chair of Systems Design.
    5. Ladislav Kristoufek, 2015. "What Are the Main Drivers of the Bitcoin Price? Evidence from Wavelet Coherence Analysis," PLOS ONE, Public Library of Science, vol. 10(4), pages 1-15, April.
    6. Kaplanski, Guy & Levy, Haim, 2010. "Sentiment and stock prices: The case of aviation disasters," Journal of Financial Economics, Elsevier, vol. 95(2), pages 174-201, February.
    7. David Yermack, 2013. "Is Bitcoin a Real Currency? An economic appraisal," NBER Working Papers 19747, National Bureau of Economic Research, Inc.
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    JEL classification:

    • E49 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Other

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