‘Crypto president’: Do narrative political signals drive cryptocurrency returns?

Abstract

This study provides evidence on the role of the quality of political signals in predicting six major cryptocurrency asset classes. Including communications from the U.S. presidential election in 2024, we find that political news affects cryptocurrency returns in the short-term (from ∼ 2 to ∼ 4 months). For most cryptoassets, text sentiment measures demonstrate superior predictive performance compared to historical cryptocurrency time series in out-of-sample forecasts. • Analyzes the effect of political signals on cryptocurrency returns. • Political news influences cryptocurrency returns in the short term. • Political signals enhances the accuracy of Bitcoin return forecasts.