The differential influence of social media sentiment on cryptocurrency returns and volatility during COVID-19

Nikolaos Kyriazis; Stephanos Papadamou; Panayiotis Tzeremes; Shaen Corbet

doi:10.1016/j.qref.2022.09.004

The differential influence of social media sentiment on cryptocurrency returns and volatility during COVID-19

Q Rev Econ Finance. 2023 Jun:89:307-317. doi: 10.1016/j.qref.2022.09.004. Epub 2022 Sep 30.

Authors

Nikolaos Kyriazis¹, Stephanos Papadamou¹, Panayiotis Tzeremes¹, Shaen Corbet^{2

3}

Affiliations

¹ University of Thessaly, Filellinon, Volos 382 21, Greece.
² DCU Business School, Dublin City University, Dublin 9, Ireland.
³ School of Accounting, Finance and Economics, University of Waikato, New Zealand.

Abstract

This research investigates the effects of several measures of Twitter-based sentiment on cryptocurrencies during the COVID-19 pandemic. Innovative economic, as well as market uncertainty measures based on Tweets, along the lines of Baker et al. (2021), are employed in an attempt to measure how investor sentiment influences the returns and volatility of major cryptocurrencies, developing on non-linear Granger causality tests. Evidence suggests that Twitter-derived sentiment mainly influences Litecoin, Ethereum, Cardano and Ethereum Classic when considering mean estimates. Moreover, uncertainty measures non-linearly influence each cryptocurrency examined, at all quantiles except for Cardano at lower quantiles, and both Ripple and Stellar at both lower and higher quantiles. Cryptocurrencies with lower values are found to be unaffected by investor sentiment at extreme values, however, prove to be profitable due to more aligned investor behaviour.

Keywords: Black Swans; COVID-19; Cryptocurrencies; Pandemics; Sentiment; Uncertainty.