Do Investors Feedback Trade in the Bitcoin—And Why?

Posted: 21 Aug 2021 Last revised: 24 Aug 2021

See all articles by Rabaa Karaa

Rabaa Karaa

University of Sousse-IHEC of Sousse

Skander Slim

University of Dubai-DBS

John W. Goodell

University of Akron - Department of Finance, College of Business Administration

Abhinav Goyal

University of Birmingham; University College Cork

Vasileios Kallinterakis

University of Liverpool - Management School (ULMS)

Date Written: August 16, 2021

Abstract

We empirically examine whether feedback traders are active in the Bitcoin and the extent to which their presence is affected by a series of noise-related factors (sentiment; volume; liquidity) at three different frequencies (hourly; daily; weekly) for the April 2013–July 2019 period based on Bitstamp data. Our findings suggest that positive feedback trading grows stronger for higher (hourly; daily) frequencies, with its presence manifesting itself mainly during periods of high/improving sentiment and high/rising volume/liquidity. Additional tests reveal that the significance of hourly feedback trading is identified during hours corresponding to the trading hours of major European/North American markets. Overall, our results confirm extant literature evidence on the prevalence of noise trading in cryptocurrencies, while further showcasing that the factors motivating feedback trading in other asset classes (equities; ETFs; futures) exhibit similar effects over the presence of feedback traders in the cryptocurrency market.

Keywords: Bitcoin; feedback trading; sentiment; volume; liquidity

JEL Classification: G15; G40; G41

Suggested Citation

Karaa, Rabaa and Slim, Skander and Goodell, John W. and Goyal, Abhinav and Kallinterakis, Vasileios, Do Investors Feedback Trade in the Bitcoin—And Why? (August 16, 2021). Available at SSRN: https://ssrn.com/abstract=3907771 or http://dx.doi.org/10.2139/ssrn.3907771

Rabaa Karaa

University of Sousse-IHEC of Sousse ( email )

40 Route de la ceinture, Sahloul 3
Sousse, TN Sousse 405

Skander Slim

University of Dubai-DBS ( email )

AL MAKTOOM STREET
Dubai, 14143
United Arab Emirates

John W. Goodell

University of Akron - Department of Finance, College of Business Administration ( email )

259 S. Broadway
Akron, OH 44325
United States

Abhinav Goyal (Contact Author)

University of Birmingham ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

University College Cork ( email )

O'Rahilly Building
College Road
Cork
Ireland
+353 (0)21 490 2839 (Phone)

Vasileios Kallinterakis

University of Liverpool - Management School (ULMS) ( email )

Chatham Street
Liverpool, L69 7ZH
United Kingdom

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