The role of media coverage in the bubble formation: Evidence from the Bitcoin market

Abstract

This paper explores the role of media coverage in bubble formation in the Bitcoin market.Three main findings emerge. First, media coverage, regardless of the tone, increases the next day’s Bitcoin returns in the bubble period but not in the non-bubble period. Second, the Bitcoin returns can predict media coverage of Bitcoin both in the bubble and non-bubble periods. Finally, there is an insignificant relationship between media coverage and the next day’s Bitcoin’s trading volume in the bubble period but a negative relationship between them in the non-bubble period. Overall, our findings demonstrate that media coverage can act as a driver of Bitcoin returns during bubbles, providing support to Shiller’s argument and advancing understandings of the formation of bubbles and influences of media coverage.