Assessing the influence of celebrity and government endorsements on bitcoin’s price volatility

Abstract

The global market capitalisation of bitcoin has exponentially increased in recent years and there are concerns that the current prices of bitcoin do not reflect the true and fair underlying value of this particular type of digital asset. Applying Cue utilisation theory and signalling theory, and using a panel data on bitcoin prices from Bloomberg between 1st November 2019 and 31st May 2021, we examine the association between celebrity and government endorsements and volatility in bitcoin prices. We find that positive celebrity tweets and positive government sentiments towards bitcoin are significantly positively associated with positive changes in its prices. Our findings imply that although celebrity endorsements may cause a temporary ‘exponential rise’ in bitcoin prices, investors need to carefully diversify their portfolio to maximise their risk–return relationship.