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A U-shaped relationship between the crypto fear-greed index and the price synchronicity of cryptocurrencies

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  • Wang, Jying-Nan
  • Liu, Hung-Chun
  • Hsu, Yuan-Teng

Abstract

In this study, we use intraday data on Bitcoin, Ethereum, Litcoin, and Monero, traded on the Bitfinex exchange, to investigate the impact of the crypto fear and greed index (FGI) on the pairwise price synchronicity of these cryptocurrencies. Based on data from February 2018 to June 2023, our results show that the relationship between investors’ collective sentiment (the FGI) and price synchronicity (as measured by the realized correlation) exhibits a U-shaped pattern rather than a linear one. This is the first study to document a U-shaped relationship between FGI-based online investor sentiment and the price synchronicity of cryptocurrencies.

Suggested Citation

  • 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).
    • Handle: RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323011352
    DOI: 10.1016/j.frl.2023.104763
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    More about this item

    Keywords

    Fear and greed index; Price synchronicity; U-shaped relationship; Cryptocurrency; Realized correlation;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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