A new perspective on how investor sentiment affects herding behavior in the cryptocurrency market

An-Sing Chen and Huong Thi Nguyen

Finance Research Letters, 2024, vol. 67, issue PA

Abstract: This study examines how news sentiment impacts herding (anti-herding) behavior in the cryptocurrency market. We categorize the cryptos into “clean” and “dirty” based on their energy consumption. The results show that news sentiment has divergent effects. When economic news positively overwhelms investors, herding becomes more apparent among the "clean" cryptocurrencies while the "dirty" exhibits more pronounced anti-herding. In clean cryptocurrencies, as the market is downward (upward), herding (anti-herding) is more evident if the investors are more optimistic about economic news. The findings are crucial for regulators and other participants to better manage investments in the bitcoin market.

Keywords: Sentiment; Herding; Cryptocurrency; Crypto; Clean; Dirty; Market return (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324007670

DOI: 10.1016/j.frl.2024.105737

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