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How connected is the crypto market risk to investor sentiment?

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  • Lin, Xudong
  • Meng, Yiqun
  • Zhu, Hao

Abstract

We examine the connection of investor sentiment and crypto market risk within the decomposed and partial connectedness framework. By identifying interconnectedness and bi-directional causal relationship between online investor sentiment, bitcoin investor sentiment and 12 dominant cryptos, we find strong correlations between investor sentiment and volatility spillovers in the crypto market, emphasizing the importance of considering sentiment contagion when analyzing crypto market movements. This study offers valuable insights for market participants and regulators, while also contributing to the existing literature on sentiment analysis and market dynamics in the crypto domain.

Suggested Citation

  • Lin, Xudong & Meng, Yiqun & Zhu, Hao, 2023. "How connected is the crypto market risk to investor sentiment?," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323005494
    DOI: 10.1016/j.frl.2023.104177
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    Cited by:

    1. Ali, Shoaib & Naveed, Muhammad & Yousaf, Imran & Khattak, Muhammad Sualeh, 2024. "From cryptos to consciousness: Dynamics of return and volatility spillover between green cryptocurrencies and G7 markets," Finance Research Letters, Elsevier, vol. 60(C).
    2. Wang, Yi & Ali, Shoaib & Ayaz, Muhammad, 2024. "Equity markets and ESG dynamics: Assessing spillovers and portfolio strategies through time-varying parameters," Energy Economics, Elsevier, vol. 134(C).
    3. Lin, Xudong & Meng, Yiqun & Zhu, Hao, 2024. "Exploring hedging potentials of green bonds against oil price shocks: Evidence from quantile-on-quantile connectedness measures," Finance Research Letters, Elsevier, vol. 65(C).
    4. Wang, Jying-Nan & Liu, Hung-Chun & Hsu, Yuan-Teng, 2024. "A U-shaped relationship between the crypto fear-greed index and the price synchronicity of cryptocurrencies," Finance Research Letters, Elsevier, vol. 59(C).

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