Are markets sentiment driving the price bubbles in the virtual?

Myriam Ben Osman, Emilios Galariotis, Khaled Guesmi, Haykel Hamdi and Kamel Naoui

International Review of Economics & Finance, 2024, vol. 89, issue PB, 272-285

Abstract: This paper investigates the existence of speculative bubbles in four crypto-market components (Bitcoin, Ethereum, CRIX index, DeFi pulse index) while date-stamping them, before using a wavelet coherence approach to look after the co-movement of each of those four digital tokens with three sentiment indices reflecting three different markets (Stock, gold, and crypto markets). Thereafter, we study the sentiment-price return connection and its concordance with periods of existing bubbles. Our results show the existence of multiple bubble regimes in the virtual market and more specifically, a huge bubble occurring during the crypto-market bull phase for Bitcoin, Ethereum, and CRIX. Moreover, we find that the bubbles that occurred during the COVID-19 pandemic concord with periods of high sentiment co-movement with the three markets. Hence, some of those bubble periods are in phases with periods of high co-movement with sentiments toward different markets. In addition, the fear and greed toward the crypto-market seem to be the leading sentiment index that highly influences the crypto-market components and their bubble appearances.

Keywords: Cryptocurrency bubble; Sentiment; Stock market; Gold market; Cryptocurrency market; GSADF; Wavelet coherence (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:89:y:2024:i:pb:p:272-285

DOI: 10.1016/j.iref.2023.10.041

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