1Shamsuddeen Muhammad Ahmad and 2Aisha Turaki Ibrahim
Department of Management
School of Arts, Management and Social Science
Skyline University, Nigeria
Abstract
This study investigated the influence of investor sentiment on cryptocurrency price volatility within a behavioural finance and financial technology (FinTech) innovation framework. Using daily data for Bitcoin and Ethereum spanning 2016–2024, investor sentiment is proxied by Google search intensity, Twitter-based sentiment indices, and the Crypto Fear & Greed Index. Volatility dynamics are modelled through GARCH-family specifications, while causality is explored via Vector Autoregression (VAR) and Granger causality tests. Empirical results reveal pronounced volatility persistence and confirm that investor sentiment significantly amplifies or mitigates market fluctuations: heightened search intensity and social media sentiment exacerbate volatility, whereas balanced sentiment dampens it. Granger tests further establish a unidirectional causal flow from sentiment to volatility, indicating that shifts in investor mood precedes price instability rather than respond to it. These results advance behavioural finance theory by demonstrating that cryptocurrency markets, as FinTech-driven innovations, are primarily governed by sentiment-driven dynamics rather than fundamentals. Accordingly, the study recommends that regulators, policymakers, and market participants incorporate sentiment analytics and digital behavioural metrics into risk-assessment frameworks and trading models. Integrating such behavioural indicators can enhance early-warning systems for volatility shocks, strengthen market stability, and support evidence-based governance in the rapidly evolving FinTech ecosystem.
Keywords: Behavioral finance, Cryptocurrency volatility, Investor sentiment