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Time-Varying Nexus between Investor Sentiment and Cryptocurrency Market: New Insights from a Wavelet Coherence Framework

Author

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  • Hashem A. AlNemer

    (Department of Finance and Economics, College of Business, University of Jeddah, Asfan Road 2749, Jeddah 23890, Saudi Arabia)

  • Besma Hkiri

    (Department of Finance and Economics, College of Business, University of Jeddah, Asfan Road 2749, Jeddah 23890, Saudi Arabia)

  • Muhammed Asif Khan

    (Department of Management Sciences, University of Swabi, Khyber Pakhtunkhwa 23430, Pakistan)

Abstract

This study attempts to investigate the nexus between investor sentiment and cryptocurrencies prices. Our empirical investigation merges bivariate and multivariate wavelet tools to examine the investor sentiment nexus to inter-cryptocurrencies prices. The study outcomes show that the Sentix Investor Confidence index provides significant information in explaining long-term changes in Bitcoin and Litecoin prices. Moreover, the findings generated from the multiple wavelet coherence illustrate the simultaneous contribution of cryptocurrencies and the Sentix Investor Confidence index in explaining the Bitcoin index movement across frequencies and over horizons, especially during bubble burst periods. The study also suggests a time-dependent relationship of Bitcoin prices with alternative cryptocurrencies and the Sentix Investor Confidence index, mostly pronounced during the Bitcoin bubble. We discuss our results using GSV-based investor sentiment. Our findings remain robust and confirm the strong predictive power of investor sentiment in cryptocurrencies price movements over time and across scales.

Suggested Citation

  • Hashem A. AlNemer & Besma Hkiri & Muhammed Asif Khan, 2021. "Time-Varying Nexus between Investor Sentiment and Cryptocurrency Market: New Insights from a Wavelet Coherence Framework," JRFM, MDPI, vol. 14(6), pages 1-19, June.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:6:p:275-:d:577199
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    2. Ben Osman, Myriam & Galariotis, Emilios & Guesmi, Khaled & Hamdi, Haykel & Naoui, Kamel, 2024. "Are markets sentiment driving the price bubbles in the virtual?," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 272-285.
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    4. Osman, Myriam Ben & Urom, Christian & Guesmi, Khaled & Benkraiem, Ramzi, 2024. "Economic sentiment and the cryptocurrency market in the post-COVID-19 era," International Review of Financial Analysis, Elsevier, vol. 91(C).

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