A Model Of The Relationship Between Investor Sentiment And Price Volatility Of Bitcoin

Digital currency can be divided into private digital currency and central bank digital currency according to the issuing body.Private digital currency,such as bitcoin and Ethereum,is a kind of cryptocurrency,which has a high degree of privacy,so it becomes a common money laundering tool.Unlike traditional financial markets,the digital currency market has no direct connection with the real economy,but it can indirectly affect various industries.With the deepening of economic globalization,the influence of global financial market on China’s commodity market is increasing.The resulting economic fluctuations can affect China’s commodity market through various transmission mechanisms,and further affect the industries closely related to finance.Therefore,the research on the volatility of digital currency has great practical significance.In view of the above analysis,this paper selects a relatively representative bitcoin as the research object.This study consists of two parts.The first part obtains comments about bitcoin from Kaggle and uses machine learning models such as BI-LSTM and XGBOOST for training.It crawls comments about bitcoin from Twitter from December 17,2021 to May 16,2022.The model with the highest ACC was selected to classify Twitter comments,and then the investor sentiment score in days was obtained by referring to the calculation method of document sentiment.The second part collects bitcoin price volatility(Vol),S&P500 index(VIX),institutional investor position(IP),bitcoin return rate(BR),Google Search Index(GT),and other websites such as bitcointalk.org and bitcoincharts.com.Bitcoin transaction volume(TV),using the above data for empirical analysis.The final results show that the accuracy of the BI-LSTM model is the highest,and there is a significant positive effect between the fluctuation of investor sentiment and the volatility of Bitcoin price.The trading behavior of investors plays an intermediary role between the fluctuation of investor sentiment and the volatility of Bitcoin price.The amount of institutional investors’ Bitcoin holdings negatively moderates the effect of investor sentiment on Bitcoin price volatility model.Positive consumer sentiment has a greater impact on bitcoin price volatility than negative sentiment.This paper further improves the research on the impact of investor sentiment on the volatility of Bitcoin market,innovatively uses the deep learning model to conduct sentiment analysis on the text comments of bitcoin,and introduces the institutional investor position and investor trading behavior index to explore the mechanism of investor sentiment’s influence on the volatility of bitcoin price.This paper can help bitcoin investors control irrational factors when making investment decisions,establish rational risk perception awareness,and reduce the risk of digital currency investment.At the same time,this paper provides theoretical guidance when the government regulates the healthy development of digital currency.