Emotional distance and Bitcoin volatility

We text-mine 2,125,788 posts on Bitcointalk.org from January 2014 to June 2024 to explore the link from differences of emotion among investors to Bitcoin’s extraordinary prices swings. The cross-sectional width of emotions, i.e. emotional difference, is statistically significantly associated with Bitcoin’s volatility. The least absolute shrinkage and selection operator (LASSO) method and the nonlinear iterative partial least squares (NIPALS)–variable importance-in-projection (VIP) algorithm also ascertain that Bitcoin prices may mainly reflect the view of highly emotional investors, making Bitcoin’s volatility more aligned with the cross-section of emotions. We do not argue that the profession needs to abandon the laissez-faire approach to cryptocurrencies. Rather, we call for investor education to mitigate individual-level psychological biases and emotional actions.