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

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  • Azqueta-Gavaldón, Andrés

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.

Suggested Citation

  • Azqueta-Gavaldón, Andrés, 2020. "Causal inference between cryptocurrency narratives and prices: Evidence from a complex dynamic ecosystem," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 537(C).
    • Handle: RePEc:eee:phsmap:v:537:y:2020:i:c:s0378437119314736
    DOI: 10.1016/j.physa.2019.122574
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    References listed on IDEAS

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    More about this item

    Keywords

    Narratives; Cryptocurrencies; Sentiment analysis; Latent dirichlet allocation (LDA); Complex dynamic systems; Convergent cross mapping (CCM);
    All these keywords.

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • G1 - Financial Economics - - General Financial Markets
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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