Decrypting Metaverse crypto Market: A nonlinear analysis of investor sentiment

Samet Gunay, Mohamed M. Sraieb and Shahnawaz Muhammed

International Review of Financial Analysis, 2024, vol. 96, issue PB

Abstract: This study aims to investigate the role of investor sentiment in the emerging metaverse market, a novel entrepreneurship model. Empirical analyses are conducted through various causality tests to reveal the predictive power of investor sentiment on the price developments of the metaverse market. The Nonlinear Granger causality test indicates causal effects running from BTC (Bitcoin), GT (Google Trend), and FGI (Fear-Greed Index) to MVI (Metaverse Index). Further examination of these interactions through MS-VAR analysis reveals that under bear market regimes, both investor sentiment proxies (GT and FGI) and BTC have a statistically significant causal effect on the returns of MVI. This finding suggests that metaverse crypto market returns are substantially influenced by investor sentiment during periods of anxiety and turmoil, evident in steep bear markets, rather than during periods of tranquility and euphoria characteristic of bull markets. The results of the time-varying approach confirm this finding by indicating spikes in causal effects towards the end of 2021, during which a severe crash in cryptocurrency markets occurred. Overall, the causal links during market downturns may stem from the fear of missing out (FOMO) in retail investors, who mainly dominate the sentimental factors utilized in this study.

Keywords: Metaverse; Investor sentiment; Nonlinear analysis; Cryptocurrency market; Google trend, fear & greed index (search for similar items in EconPapers)
JEL-codes: C01 C22 C24 C58 G15 G41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:96:y:2024:i:pb:s105752192400646x

DOI: 10.1016/j.irfa.2024.103714

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