Download This PaperHow Do Investors Value Technology in Cryptocurrency? Evidence from Textual Analysis
57 Pages Posted: 11 May 2020 Last revised: 30 Mar 2025
Date Written: March 29, 2025
Abstract
This paper examines how investors evaluate new technologies from the perspective of cryptocurrencies.
Employing a machine learning method, we construct a novel Tech Index from
the voluntarily disclosed whitepapers of cryptocurrencies to capture the technology sophistication
of cryptocurrency. While cryptocurrencies with higher Tech Indexes are more likely
to enjoy early success and a high first-day listing price, they tend to earn significantly lower
subsequent returns after being listed. The return reversal is stronger when market sentiment is
higher. Moreover, cryptocurrencies with higher Tech Index earn lower returns after the unexpected
shocks in the cryptocurrency market, such as Luna Crash and FTX scandal. Overall,
these findings suggest investors overreact to new technologies in cryptocurrencies.
Keywords: Cryptocurrency, Overreaction, Information, Textual, Technology, Voluntary Disclosure
JEL Classification: G12, G14, G23
Suggested Citation: Suggested Citation
Liu, Yukun and Sheng, Jinfei and Wang, Wanyi, How Do Investors Value Technology in Cryptocurrency? Evidence from Textual Analysis (March 29, 2025). Available at SSRN: https://ssrn.com/abstract=3577208 or http://dx.doi.org/10.2139/ssrn.3577208
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