Abstract
The rise of cryptocurrencies and social media platforms has given us unique insight on the impact of investor attention on investor trading behavior. In this paper, we focus specifically on the impact of news and social media attention on Bitcoin across five major global exchanges: Bitfinex, Bitstamp, BTC-e, Coinbase, and Kraken. We break attention into three categories: social media attention by existing investors proxied through Reddit posts (seasoned attention), social media attention by new investors proxied through Reddit subscribers (novice attention), and traditional online media attention proxied through the number of Bloomberg news articles. We find that new entrants have a greater impact on Bitcoin than discussions and posts by existing Bitcoin holders. This suggests that rise in Bitcoin prices is driven by new investors entering into the market rather than by existing investors adjusting their valuations and beliefs. In short, the increase in attention by new investors has pushed Bitcoin prices and induced extra noise in the market. We also document some asymmetries in the transmission of investor attention to Bitcoin trades depending on exogenous news shocks.
Disgraced football coach Mark Thompson admitted to obsessively trading cryptocurrencies for 12 hours a day in the lead up to his arrest …and that he’d been consumed by watching YouTube tutorials.
– Sydney Morning Herald, June 26, 2019
The views expressed in the text belong solely to the authors and do not reflect the authors’ employers. The research was conducted during the time where Wang Chun Wei was employed as an Assistant Professor at the University of Queensland, St Lucia, QLD, Australia. All errors are our own.
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Notes
- 1.
Since the Bitcoin investor demographic is largely dominated by young men, which correlated well with the Reddit user base. source: from a survey of 5,700 adults in 2018 by the Global Blockchain Business Council, the majority of crypto investors are young males, source: http://fortune.com/2018/01/24/young-men-buying-bitcoin.
- 2.
- 3.
- 4.
Zakon (2018) blockchain timeline: https://www.zakon.org/robert/blockchain/timeline/.
- 5.
Bitcoinwiki bitcoin timeline: https://en.bitcoinwiki.org/wiki/Bitcoin_history#Bitcoin_in_2018.
- 6.
As of March 2019.
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Wei, W.C., Koutmos, D. (2023). Investor Attention and Bitcoin Trading Behaviors. In: Alphonse, P., Bouaiss, K., Grandin, P., Zopounidis, C. (eds) Essays on Financial Analytics. Lecture Notes in Operations Research. Springer, Cham. https://doi.org/10.1007/978-3-031-29050-3_6
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