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Reddit Sentiment and the Relationship to Subsequent Cryptocurrency Returns across Different Segments

Bergerud, Thomas
(2023)

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Bergerud_6619-22-00_2023.pdf
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Details

Supervisors
Ricco, Roberto
Faculty
Louvain School of Management
Degree label
Master [120] : ingénieur de gestion, à finalité spécialisée
Abstract
This paper investigates the relationship between sentiment and subsequent cryptocurrency returns for 37 different cryptocurrencies across various sectors. The sentiment is gathered from the CryptoCurrency subreddit using RedditExctractoR and the PushShift API. The paper uses an Ordinary Least Squares (OLS) model, random forest and cross-section return methodology. The OLS results perform poorly in gauging the sentiment as the p-values are mainly over 10%. The random forest performs slightly better in capturing the variable importance of the lagged sentiment variable with a high relative placement for some tokens. Cross-section return, however, performs the best and shows that a sentiment portfolio that consists of DeFi, smart contracts and memecoins get a cumulative return of 331.99% in 2021-2023, compared to a base portfolio with a return of 36.73%.