Regime Switching Behavior in Bitcoin Volatility: Exploring the Role of Investor's Fear and Greediness
Creators
- 1. Finance and Accounting, IBS - Hyderabad, The ICFAI Foundation for Higher Education, Dontanapally Campus, Shanker Pally Road, Hyderabad, India
Description
Abstract: This study aims to explore whether investor fear can offer insights into understanding Bitcoin volatility. The study confirms a substantial relationship between Bitcoin price volatility and investors fear indicated by the Crypto Fear & Greed Index. The model identifies significant and time-varying effects between Bitcoin volatility and investor sentiment. The sign and magnitude of correlation between Bitcoin volatility and investors fear fluctuate with the market state, distinguishing between high, low and moderate volatility regimes. Investor fear can signal potential shifts in market trends. Recognizing these trends early one can assist investors in adjusting their investment strategies accordingly.
Keywords: Bitcoin, Regime-Switching Model, Cryptocurrency, Investor’s Fear Index
JEL Classification Number: G1, G5