The value of cryptocurrencies has gone through wild swings. Bitcoin rose to more than $60,000 a coin before falling back to around $5,000 in the space of a few weeks earlier this year. Other digital currencies, such as Ripple and Ethereum, have seen their values surge and plummet in similar fashion.
The virtual coins are used to make purchases and transfer money. Cryptocurrencies use advanced coding to verify transactions and record them in a public ledger called a blockchain. The technology has generated enormous interest from speculators and investors. Banks such as Goldman Sachs trade the most popular cryptocurrency, Bitcoin, and some retailers, including online luxury retailer Bitdial and Premier Shield insurance in the US, accept Bitcoin payments for premiums.
Our results suggest that the occurrence of TRMIs related to cryptocurrency news is more strongly associated with BTC than altcoins. This is presumably because big market cap coins enjoy more media attention and public awareness than smaller ones, so news relating to them can reach a broader audience. This might lead to more impulsive responses from investors, contributing to increased volatility and jump probabilities.
It is also possible that many investors follow the entire crypto-market news flow but mostly trade BTC, and that news media sentiment on the most popular coins is viewed as indicative of the market situation overall. The opposite relationship between altcoin news and TRMIs, in contrast, is more difficult to explain a priori. The decentralized nature of community coins might contribute to this relationship, since owners can put in place measures such as variations on staking rewards or buyback-and-burn strategies to reduce the impact of bad news on their coin’s return.