Is online investor attention priced in cryptocurrency markets?

This study examines the relationship between investor attention on online platforms and cryptocurrency returns. Using a dataset from Twitter, Reddit, and Google Trends for the ten largest cryptocurrencies, I constructed an Investor Attention Index by employing Principal Component Analysis. Using linear regression, vector autoregression and a long-short portfolio methods, I explore the link between investor attention and returns. The results suggest that the attention index is not able to explain crypto returns, however, the inverse relationship is found to be highly significant. This finding may be interpreted as cryptocurrencies being already priced by the time they become popular on online platforms, hence the retail investor attention represented by the data is not a factor that affects the prices of crypto assets.