The determinants influencing cryptocurrency returns

The determinants influencing cryptocurrency returns

cryptocurrency market has been volatile in terms of pricing and investment returns. Very few studies have attempted to understand the dynamics of the factors influencing cryptocurrency returns. The studies documented in this thesis aim to explore these factors and examine how each factor accounts for the market return. To address this aim, three studies are undertaken, comprising a systematic literature review and empirical research. The first study employs a systematic literature review to identify the factors influencing cryptocurrency pricing and the potential gaps in this area of research. The second study draws on a three-factor model and examines the relationship between consumer confidence and cryptocurrency excess returns through empirical analytics. The third study investigates the association between the composite leading indicator and cryptocurrency returns. The latter two studies draw on a sample of 3,318 cryptocurrencies from 1 January 2014–31 December 2022. The first study’s results reveal the influential factors for cryptocurrency pricing, with these categorised as supply and demand, technology, economics, market volatility, investors’ attributes, and social media. The results of the second study show a significant negative relationship between the Consumer Confidence Index and cryptocurrency excess returns, with this finding reinforced by further robustness testing. The findings from the third paper suggest that short-term changes in the composite leading indicator are negatively associated with cryptocurrency returns. This relationship is validated by a series of additional tests and robustness tests. The studies in this thesis are the first to identify the pricing factors of cryptocurrency through the systematic literature review and by investigating the association between consumer confidence/composite leading indicator and cryptocurrency returns. The studies in this thesis contribute to consumer behaviour research and the financial market literature, as well as having important implications for regulators, policy makers, investors, portfolio managers, researchers, and firms.

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