The Impact of Macroeconomic News on Bitcoin Returns

Abstract

This paper examines the relationship between news coverage and Bitcoin returns. Previous studies have provided evidence to suggest that macroeconomic news affects stock returns, commodity prices, and interest rates. We construct a sentiment index based on news stories that follow the announcements of four macroeconomic indicators: GDP, unemployment, Consumer Price Index (CPI) and durable goods. By controlling for a number of potential biases we determine as to whether each of the series’ has a significant impact on Bitcoin returns. While an increase in positive news surrounding unemployment rates and durable goods would typically result in a corresponding increase in equity returns, we observe the opposite to be true in the case of Bitcoin. Increases in positive news after unemployment and durable goods announcements result in a decrease in Bitcoin returns. Conversely, an increase in the percentage of negative news surrounding these announcements is linked with an increase in Bitcoin returns. News relating to GDP and CPI are found not to have any statistically significant relationships with Bitcoin returns. Our results indicate that this developing cryptocurrency market is further maturing through interactions with macroeconomic news.