Do social media sentiments drive cryptocurrency intraday price volatility? New evidence from asymmetric TVP-VAR frequency connectedness measures

Abstract

In this paper, we investigate interdependencies between cryptocurrencies and investor sentiment by introducing the asymmetric TVP-VAR frequency connectedness approach. Our empirical results provide evidence of pronounced and time-varying interconnectedness between sentiment and cryptocurrency. In addition, we find that negative short-term interconnectedness dominates positive short-term interconnectedness until mid-2020 when this effect was reversed, persisting until the end of the sample period. While Ripple and Bitcoin are both found to be the main net transmitters of shocks, Stellar, Ethereum, and NEM are considered net receivers of shocks. Overall, our findings suggest that market sentiment is mainly driven by cryptocurrency volatility in both the short and the long run.