Nonlinear nexus between cryptocurrency returns and COVID–19 news sentiment

This paper examines how different categories of COVID–19 news sentiment differentially impact the behavior of cryptocurrency returns. A nonlinear technique of transfer entropy is applied to investigate the relationship between the top 30 cryptocurrencies by market capitalization and COVID–19 news sentiment to capture cryptocurrency return and volatility dynamics. Results show that COVID–19 news sentiment influences cryptocurrency returns. The nexus is unidirectional from news sentiment to cryptocurrency returns, in contrast to past findings. These results have practical implications for policymakers and market participants in understanding cryptocurrency market dynamics under stressful market conditions