One Crash, Too Many : The Impact of Global Uncertainty and Behavioural Factors on Price Development in the Cryptocurrency Market

Motivated by the current global vicissitudes, this study examines the impact of uncertainty (economic and political) and behavioural factors on the pricing of cryptocurrencies. We show that uncertainty does not significantly drive crypto prices. However, the interaction between the sentiments expressed by investors on different platforms has a significant adverse effect on the returns of the cryptocurrency market, and the impact is more pronounced for tokens within the same ecosystem. Using the asymmetric GARCH-MIDAS model and TVP-VAR, we also demonstrate the existence of a significant contagion among tokens within the same ecosystem when bad (or good) news occurs. Considering the massive unprotected losses incurred by crypto investors during crises, our results provide important insights into how portfolio managers can effectively design investment strategies