Google Searches and the Performance of Cryptocurrencies during the COVID-19 Pandemic under a Sentiment Analysis View

This paper examines the performance of the large-cap cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH), during the COVID-19 period (1/2/2020-30/12/2021) using sentiment analysis. Using the Google Trends tool, we try to quantify users’ intention to buy and sell BTC and ETH, and their sentiments against COVID fear. The empirical results show strong statistical evidence that COVID fear has a negative impact on BTC/ETH performance. Additionally, our findings indicate that Google searches which imply a buy intention have a positive influence on the performance of these cryptos, but the selling intention searches do not provide any statistically significant information. Moreover, the Granger causality tests show that: (i) COVID-19 fear Granger causes the BTC/ETH returns, (ii) there is a bi-directional Granger causality between the performance of BTC/ETH and the buy intention searches, and (iii) that the performance of the cryptocurrencies causes the sell intention searches. Further research on sentiment analysis should be conducted using data from several internet sources, e.g. Twitter, and tools such as textual analysis, in order to improve the accuracy of the sentiment indices and the asset pricing models.