Crypto news and policy innovations: Are European markets affected?

Luca Barbaglia (), Mario Bellia, Francesca Di Girolamo () and Caterina Rho
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Luca Barbaglia: European Commission - JRC, https://joint-research-centre.ec.europa.eu/index_en
Francesca Di Girolamo: European Commission - JRC, https://joint-research-centre.ec.europa.eu/index_en

No 2024-07, JRC Working Papers in Economics and Finance from Joint Research Centre, European Commission

Abstract: Digital and crypto currencies are becoming an integral part of financial markets. Nevertheless, regulation of these markets seems still at an early stage and the literature evaluating the impact of policy interventions is scarce. We investigate the reaction of crypto markets in the aftermath of a policy announcement using textual information from news and sentiment analysis. Our findings are threefold. First, there is evidence of peaks in news about crypto-assets in correspondence of the date of new developments in EU legislation, in particular about Central Bank Digital currencies. Second, we find that both returns of cryptocurrencies and general stock market returns are directly proportional to the news sentiment about crypto markets. Third, our event study shows that the introduction of regulation on digital and crypto currencies is perceived as a negative shock by financial markets, especially for digital currencies.

Keywords: cryptocurrencies; digital finance; text mining (search for similar items in EconPapers)
JEL-codes: C55 E42 G41 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2024-11
New Economics Papers: this item is included in nep-big, nep-fdg, nep-fmk, nep-mon and nep-pay
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