Beyond the Hype: Evaluating the Real Impact of News on Cryptocurrency Market Volatility

Abstract

This study used the CMC 200 Index as a cryptocurrency market benchmark to examine complex volatility patterns of cryptocurrencies. The growing interest in cryptocurrencies and the necessity to analyse their market dynamics, especially in the face of external inputs like news, prompted the study. The study examined market responses and causes to diverse stimuli using rigorous analytical models including GARCH, EGARCH, FIGARCH, and News Impact Curve. The asymmetricvolatility or “leverage effect” showed that negative events or news have a greater impact on market volatility than positive developments of similar magnitude. Symmetric volatility indicated large price shifts regardless of news direction. The left-skewed news effect curve emphasises this asymmetric volatility, demonstrating that negative news has a greater impact on market dynamics. The curve’s leftward skew shows the market’s increased susceptibility to pessimism. This suggests that negative news might undermine investor confidence in the crypto market more than favourable news. Beyond these initial reactions, the research revealed a “long memory” in market volatility, suggesting that prior shocks continue to affect its volatility over time. These studies emphasise the importance of investor sentiment in crypto market. Investors in this volatile market need honest communication and strong risk management due to the leverage impact and prior experience.