Do bitcoin returns move sentiment? Evidence from the crypto fear & greed index

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Authors: Gessie Louis
Cited by: 0
References: 10

Abstract

We study whether daily changes in investor sentiment, measured by the Crypto Fear & Greed Index (FGI), predict Bitcoin returns, and whether returns move sentiment. Using 2018–2025 daily data and a small VAR, we find: (i) ∆FGI does not Granger-cause returns and offers no out-of-sample forecasting gain; (ii) returns do Granger-cause ∆FGI. A return shock produces a sharp, transitory swing in sentiment, while a sentiment shock has economically negligible effects on returns. Results are robust to weekly aggregation, adding VIX and Economic Policy Uncertainty (EPU), pre/post-2021 splits, high- vs. low-VIX days, and asymmetric (positive/negative) return moves. We conclude the FGI mostly reacts to prices and has limited value for predicting daily Bitcoin returns. We also find that Bitcoin returns lead sentiment, and sentiment adds little to next-day return predictability.

Fields of Study & Subjects

Financial Markets and Investment Strategies Market Dynamics and Volatility Financial Risk and Volatility Modeling

Publication details

Journal / source
Finance Research Open
Volume
2
Issue
1
Pages
100094–100094
Publication date
13 January 2026
Language
EN