Investor Attention and Bitcoin Trading Behaviors

Wang Chun Wei and Dimitrios Koutmos ()
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Wang Chun Wei: First Sentier Investors
Dimitrios Koutmos: Texas A&M University

A chapter in Essays on Financial Analytics, 2023, pp 87-116 from Springer

Abstract: Abstract The rise of cryptocurrencies and social media platforms has given us unique insight on the impact of investor attention on investor trading behavior. In this paper, we focus specifically on the impact of news and social media attention on Bitcoin across five major global exchanges: Bitfinex, Bitstamp, BTC-e, Coinbase, and Kraken. We break attention into three categories: social media attention by existing investors proxied through Reddit posts (seasoned attention), social media attention by new investors proxied through Reddit subscribers (novice attention), and traditional online media attention proxied through the number of Bloomberg news articles. We find that new entrants have a greater impact on Bitcoin than discussions and posts by existing Bitcoin holders. This suggests that rise in Bitcoin prices is driven by new investors entering into the market rather than by existing investors adjusting their valuations and beliefs. In short, the increase in attention by new investors has pushed Bitcoin prices and induced extra noise in the market. We also document some asymmetries in the transmission of investor attention to Bitcoin trades depending on exogenous news shocks.

Keywords: Investor attention; Cryptocurrency; VAR; Asymmetric impact (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnopch:978-3-031-29050-3_6

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DOI: 10.1007/978-3-031-29050-3_6

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