Cryptocurrency Returns, Investor Attention and Market Conditions

Abstract

The purpose of this research is to explore how investor attention, measured by GSVI, influences cryptocurrency market behavior under varying conditions. For this the study examines the impact of Google Search Volume Index (GSVI) on cryptocurrency returns, considering market uncertainty, news sentiment, and the COVID-19 pandemic. A regression analysis was conducted using datasets covering BNB, Bitcoin, Dogecoin, Solana, and Tether from 2015 to 2022. Stata was used to estimate the relationships between cryptocurrency returns and key variables, ensuring accurate and reliable results to quantify the relationships. Our findings indicate that abnormal increases in GSVI positively affect cryptocurrency returns, particularly during high uncertainty periods and when news sentiment is favorable. Moreover, the effect of investor attention on returns was significantly amplified during the COVID-19 pandemic, suggesting that global crises has heightened the role of behavioral factors in cryptocurrency markets. This research contributes to the literature by integrating investor attention with uncertainty and sentiment measures, offering a comprehensive view of cryptocurrency price dynamics. Unlike previous studies that examine these factors in isolation, our study highlights their combined effect, providing valuable insights for investors, policymakers, and analysts in understanding market trends and decision-making strategies.