Investor sentiment and bitcoin prices

Dimitrios Koutmos ()
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Dimitrios Koutmos: Texas A&M University - Corpus Christi

Review of Quantitative Finance and Accounting, 2023, vol. 60, issue 1, No 1, 29 pages

Abstract: Abstract Using a rich data set of transaction-level buy and sell orders from the major digital currency exchange Coinbase, we formulate a measure for investor sentiment and shed new evidence on the sentiment-return relation for bitcoin. Using a bootstrapped quantile regression procedure we show a significant and robust relation between rising sentiment and price increases, and vice versa, across the distribution of bitcoin price changes. This relation is shown to be robust when controlling for a variety of exchange-specific and blockchain-wide variables. This relation is also robust when controlling for aggregate momentum across major cryptocurrencies. This finding is important as our data sample spans a period before and after the introduction of futures markets for bitcoin, which has arguably resulted in a regime shift in the time series behavior of its price. Taken together, our results show that bitcoin prices can undergo regime changes and that conventional regression-type models that focus on the center of the distribution of bitcoin price changes can yield misleading estimates.

Keywords: Bitcoin; Bootstrap; Investor sentiment; Quantile regression; Robustness (search for similar items in EconPapers)
JEL-codes: C21 C32 G10 G12 G14 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s11156-022-01086-4

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