Investigating the Impact of Investor Attention on Price and Volatility of Cryptocurrency and Stablecoins

Matthew Mitten and Dr. Chris Harris, Department of Finance, Elon University, 50 Campus Drive, Elon, NC 27244

This study seeks to better understand volatility, returns, and volume in cryptocurrency prices, specifically for stablecoins. A stablecoin is a type of cryptocurrency that is backed by another asset, such as the U.S. Dollar or gold. While other scholars have viewed Bitcoin returns and volatility alongside investor attention, stablecoins have yet to be studied in this way and the effects of investor attention on stablecoin metrics are widely unknown. Factors that influence price fluctuations in cryptocurrencies, such as investor attention (or internet search mentions), are examined in particular for eight stablecoins and three non-stablecoins, including Bitcoin. First, volatility for the most popular cryptocurrencies and stablecoins were analyzed along with possible factors that may cause price volatility. Then, fixed effect statistical regressions on the panel data were used to determine correlations between outside sources (such as macroeconomic factors, investor attention, investor sentiment) and returns, volume, and volatility of the cryptocurrencies. Investor attention was hypothesized to affect price volatility the most. In addition, it was hypothesized that the volatility of stablecoins would be affected by fewer outside factors than non-stablecoins. Initial results show a difference in the effect that investor attention and investor sentiment have on cryptocurrency and stablecoins. While almost all variables studied affect price volatility of Bitcoin, fewer variables have a statistically significant impact on the price volatility of stablecoins backed by the U.S. Dollar, and even fewer affect the price volatility of stablecoins backed by gold. Volatility for stablecoins backed by the U.S. Dollar are also much more sensitive to investor sentiment than non-stablecoins. Initial results also show that cryptocurrency volume affects future investor attention for some cryptocurrencies such as Bitcoin, as well as for most of the stablecoins backed by the U.S. Dollar. 

Additional Abstract Information

Presenter: Matthew Mitten

Institution: Elon University

Type: Poster

Subject: Economics

Status: Approved

Time and Location

Session: Poster 5
Date/Time: Tue 12:30pm-1:30pm
Session Number: 4132