Fear Sentiment, Uncertainty, and Bitcoin Price Dynamics: The Case of COVID-19

Conghui Chen · Lanlan Liu · Ningru Zhao

292 citations0/0 files storedEmerging Markets Finance and Trade

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COVID-19 Pandemic Impacts Financial Risk and Volatility Modeling Market Dynamics and Volatility

Abstract

This paper studies the impact of fear sentiment caused by the coronavirus pandemic on Bitcoin price dynamics. We construct a new proxy for coronavirus fear sentiment using hourly Google search queries on coronavirus-related words. The results show that market volatility has been exacerbated by fear sentiment as the result of an increase in search interest in coronavirus. Moreover, we find that negative Bitcoin returns and high trading volume can be explained by fear sentiment regarding the coronavirus. Our results also show that Bitcoin fails to act as a safe haven during the pandemic.

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References

1969Investigating Causal Relations by Econometric Models and Cross-spectral Methods 2006Investor Sentiment and the Cross‐Section of Stock Returns 2007Giving Content to Investor Sentiment: The Role of Media in the Stock Market 2015Bitcoin, gold and the dollar – A GARCH volatility analysis 2015Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin 2014The Sum of All FEARS Investor Sentiment and Asset Prices 2017Exploring the Dynamic Relationships between Cryptocurrencies and Other Financial Assets 2000The Investor Fear Gauge

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