Price clustering and sentiment in bitcoin

While prior research provides evidence of price clustering in bitcoin, this study seeks to explain the unusual level of bitcoin price clustering using various measures of bitcoin-level and market-wide sentiment. Our results suggest that sentiment has a strong positive association with price clustering. In economic terms, a one standard deviation increase in sentiment – measured by Google Trends – explains about 2.5% to 5% of the unusual level of price clustering in Bitcoin. We also find that our results are robust when we use other measures of investor sentiment.