What drives DeFi prices? Investigating the effects of investor attention

Shaen Corbet, John W. Goodell and Samet Günay

Finance Research Letters, 2022, vol. 48, issue C

Abstract: We comparatively assess drivers of DeFi token prices, testing the impact and connectedness between Bitcoin (as a cryptocurrency asset-class leader), Ethereum (as a platform for DeFi), and Google Trends (as a signal of investor attention). While we evidence varying causal linkages between Bitcoin or Ethereum and Defi tokens, these linkages are restricted to bear markets. In contrast, restricted MS-VAR (LR) modelling uncovers bi-causal relationships between DeFi tokens and investor sentiment in both bull and bear markets. We conclude that, rather than platform valuation, investor attention is a dominant driver of DeFi prices, with DeFi being a separate asset class from mainstream cryptocurrencies.

Keywords: DeFi; Cryptocurrency; MS-VAR; Causality; Connectedness; Sentiment (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (36)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322001672

DOI: 10.1016/j.frl.2022.102883

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