Hype as a Factor on the Global Market: The Case of Bitcoin

Abstract

The impact of Bitcoin-related Google queries, Facebook likes, reposts and comments on Bitcoin price is analyzed with the help of ARDL and GARCH models. Our results have led us to the following conclusions. Firstly, a sharp increase in Bitcoin’s popularity or hype, which manifested itself through a rise in the number of Bitcoin-related Google queries, has resulted in an increase in Bitcoin price. This effect corresponds to the description of the ‘collective hysteria’ that spread in the online community and was triggered by the increasing volatility of the Bitcoin market. Secondly, we found that Bitcoin’s popularity among ordinary Internet users has a positive impact in low-volatile and highly volatile rising markets but a negative one in a highly volatile falling market. Thirdly, Bitcoin’s popularity among informed Internet users has a negative impact on Bitcoin price in a period of low volatility. Fourthly, uninformed users’ trust in Bitcoin has a positive influence on Bitcoin price in low-volatile and highly volatile falling markets. Finally, the main factors that shape the Bitcoin market are trust and popularity.

Keywords:

• Bitcoin
• Social media
• Popularity
• Hype

SUBJECT CLASSIFICATION CODES:

• G15
• G14
• G41

Correction Statement

This article has been corrected with minor changes. These changes do not impact the academic content of the article.

Acknowledgment

We are also thankful to Prof. Olga Popova from the Institute for East and Southeast European Studies (IOS) (Germany, Regensburg), Azamat Valey, Nataly Davidson and Nadezhda Kislyak (Ural Federal University) for their help and interesting ideas.

We appreciate the help of Svetlana Kovalenko, Viktoria Polyakova and Ekaterina Purgina from the Ural Federal University (Russia, Ekaterinburg).

We are grateful to the two blind reviewers for their patience, time, useful comments and suggestions.

Notes

1 Portal for Fundamental Analysis of Cryptocurrency. Social media use in 2022. Available at: https://www.coingecko.com/ (2022). Accessed 22 Jan 2022.

2 Krugman, P. Transaction Costs and Tethers: Why I’m a Crypto Skeptic (2018). Accessed: 2018-09-14. The New York Times.

3 Cambridge Dictionary. Access mode: https://dictionary.cambridge.org/dictionary/english/"thehysteria". Last accessed date: 21.11.2018.

4 Blockchain. Access mode: https://www.blockchain.com, Last accessed date: 21.11.2018.

5 World Gold Council Access mode: https://www.gold.org/. Last accessed date: 15.04.2018.

6 World Gold Council Access mode: https://www.financialresearch.gov. Last accessed date: 15.04.2018.

Additional information

Funding

The reported study was funded by RFBR according to the research project no. 20-04-60158.