Working Paper
Social Network and Sentiment Contagion: Evidence from the Bitcoin Market
Abstract: Using new data on social interactions and individual trading records in the Bitcoin market, we show that investor sentiment spreads across social connections. Investors systematically revise their beliefs about Bitcoin prices in the direction of average peer sentiment—even though that sentiment does not predict future prices. We document specific patterns in the diffusion of beliefs across networks, including evidence consistent with confirmation bias. Moreover, this social-sentiment contagion influences both individual trading decisions and overall market dynamics. Our novel measure of contagion intensity significantly forecasts Bitcoin volatility, trading volume and market crashes.
JEL Classification: G11; G12; G41; G53;
https://doi.org/10.24149/wp2605
Access Documents
File(s):
File format is application/pdf
https://www.dallasfed.org/~/media/documents/research/papers/2026/wp2605.pdf
Description: Full text
Authors
Bibliographic Information
Provider: Federal Reserve Bank of Dallas
Part of Series: Working Papers
Publication Date: 2026-03-02
Number: 2605