The dynamics of cryptocurrency market from behavioral finance perspective

Almisshal B., BULUT H. İ.

Journal of Behavioral and Experimental Finance, vol.49, 2026 (SSCI, Scopus) identifier identifier

  • Publication Type: Article / Article
  • Volume: 49
  • Publication Date: 2026
  • Doi Number: 10.1016/j.jbef.2025.101126
  • Journal Name: Journal of Behavioral and Experimental Finance
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Keywords: ARDL, Behavioral finance, Cryptocurrency, Investor sentiment, VAR, Volatility
  • Karadeniz Technical University Affiliated: Yes

Abstract

This study constructs a Composite Investor Sentiment Index (CIST) integrating six behavioral and market-based proxies to examine how investor sentiment influences cryptocurrency returns and volatility. Using weekly data from March 2018-July 2023, we decompose sentiment into rational and irrational components via ARDL and analyze dynamic effects through VAR and impulse responses. The first principal component explains almost 70 % of total variance. Results show that rational sentiment exerts persistent, long-run effects on returns and volatility, while irrational sentiment causes short-lived volatility spikes. The findings advance behavioral finance by demonstrating that distinguishing cognitive from emotional investor reactions enhances understanding of cryptocurrency market behavior.