Bitcoin price jumps and investor sentiment indicators

ABSTRACT

Bitcoin has attracted significant attention from investors over recent years. Due to infrequent jumps in Bitcoin prices, this paper employs the ARJI model of Chan and Maheu (2002) to describe jump risks of Bitcoin prices, and to examine the possible influencing factors of jump risks. Empirical results find that the jump component is the most important driving force of the volatility of Bitcoin returns, and that two investor sentiment indicators (the Bitcoin trading volumes and the number of Bitcoin unique addresses) are positive related to the jump risk of Bitcoin returns. These findings provide an important insight into the investment risk of Bitcoin prices.

KEYWORDS:

• Bitcoin
• jump risks
• investor sentiment indicators
• volatility

JEL CLASSIFICATION:

• C51
• G10

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ The sample period starts on the second halving of Bitcoin market on 9 July 2016.

² Results are available upon request.

³ Results are available upon request.

⁴ The analyses for 0.6, 0.7, and 0.9 have similar results.