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Causal inference between cryptocurrency narratives and prices: Evidence from a complex dynamic ecosystem

Andres Azqueta-Gavaldon

Physica A: Statistical Mechanics and its Applications, 2020, vol. 537, issue C

Abstract: In this note, I explore the causal relationship between narratives propagated by the media and crypto prices. Firstly, I unveil four cryptocurrency-related narratives: investment, technological innovation, security breaches and regulation. Secondly, after acknowledging their tone (sentiment), I apply Convergent Cross Mapping (CCM) to assess the causal relationship between narratives and prices. I find strong bi-directional causal relationships between narratives concerning investment and regulation while a uni-directional causal association exists in narratives relating technology and security to prices. Therefore, this work contributes to the recent economic literature that connects consumer behaviour to narratives.

Keywords: Narratives; Cryptocurrencies; Sentiment analysis; Latent dirichlet allocation (LDA); Complex dynamic systems; Convergent cross mapping (CCM) (search for similar items in EconPapers)
JEL-codes: C4 G1 C11 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.physa.2019.122574

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