The rapid growth of cryptocurrencies alongside persistent market volatility raises questions about the role of investor sentiment in price formation, particularly in emerging economies. This study aims to address this gap by examining the impact of Indian investor sentiment, measured through a Google Investor Sentiment Index (GISI), on the returns of the top ten cryptocurrencies.
This study constructs a GISI using India-specific Google Trends data and examines its effect on the daily returns of the cryptocurrencies using a quantile regression framework with slope equality tests across different market conditions.
Results indicate a significant influence of Indian investor sentiment on cryptocurrency returns in a non-linear manner, with the strongest impact occurring during market downturns. Effects vary across cryptocurrencies and market conditions.
This study demonstrates that Google search data can serve as a real-time sentiment indicator for investors, exchanges and policymakers in emerging markets.
To the best of the authors’ knowledge, this is the first study to analyse the impact of India-specific investor sentiment on the broader cryptocurrency market.
