The Effect Of Network Hype And Asset Pricing In The Cryptocurrency Market

In 2008,Mr.Nakamoto published an article titled "Bitcoin: A Point-to-Point Electronic Cash System",which describes the electronic currency "Bitcoin" and its algorithm.Soon,His ideas were put into practice in 2009 by himself.,the first bitcoin algorithm client program was developed and the first "mining" was carried out,and the first batch of bitcoin was mined.Since then,a lot of cryptocurrencies such as Bitcoin,Ethereum and Ripple have begun to attract global attention.Whether cryptocurrencies can completely replace the currency in the future is disputed among people,and many investors regard cryptocurrency as a risky asset to invest in order to Pursue high profits.according to the statistics of CoinMarketCap website,there are 1881 cryptocurrencies.The rapidly expanding cryptocurrency market inspire us to think about the question of cryptocurrency price: What factors are determining the cryptocurrency price? We use the change of Google search volume as an indicator of network hype and test whether there is " effect of network hype " in the cryptocurrency market.we use Fama-Mecbeth regression method to verify that there is a significant correlation between market value and search volume change and cross-sectional return of cryptocurrencies.And we further propose a three-factor pricing model of cryptocurrency market consisting of cryptocurrency market factor,size factor and "network hype" factor.This paper draws on the research theory and method of mature asset pricing model in stock market,empirically studying the effectiveness of asset pricing model in cryptocurrency market,and testing the three-factor pricing model including cryptocurrency market factor,size factor and "network hype" factor.The explanatory power of the vision return in the cryptocurrency market,and the performance of the model is verified by the GRS test method.In addition,this paper constructs other factors(liquidity factor,reversal factor and momentum factor)to test whether they can be used as a supplement to the three-factor model.Our empirical results show that(1)there is an effect of significant network hype in the cryptocurrency market,network hype is the driving force for the increase of cryptocurrency price;(2)the average excess return of cryptocurrency is negatively correlated with the size,and the cryptocurrency of small market value Assets have high return and big-size cryptocurrency assets have lower return;(3)Google search attention factor has a significant positive correlation,if the google search volumes of a cryptocurrency asset rises faster,The higher the return of the asset;(4)The constructed three-factor model has a strong explanatory power for the cross-sectional excess return of the cryptocurrency,and can well explain the momentum factor,the inversion factor and the liquidity factor.These factors cannot be supplemented for three factors model.These findings provide a very valuable theoretical basis for investors to choose assets portfolios.The three-factor model can explain the return of cryptocurrency.The findings in the research enrich the research content and expand scope of the existing literature,and the empirical results have important reference value for the development of cryptocurrency in the future.