Nerv Trading

The cryptocurrency market is highly volatile, and emotions play a crucial role in driving price fluctuations. Investor sentiment, often influencedbyfear, greed, and hype, can trigger rapid buying or selling, leadingtodramatic price swings. For instance, “FOMO” (fear of missing out) maydrive prices up during bull runs, while panic selling during market downturns exacerbates crashes. Social media, news, and influential figures like Elon Musk further amplify emotional reactions, creatingherdbehavior. Behavioral finance suggests that cognitive biases, suchasoverconfidence or loss aversion, also shape trading decisions. Understanding these emotional drivers is essential for predictingmarket trends and managing investment risks in the highly speculative cryptospace.

Previous academic research has demonstrated that investor sentiment caninfluence cryptocurrency prices. For example, bullish sentiment maydrive prices up, while bearish sentiment can depress them. This report utilizes proprietary investor sentiment data from Cryptoracle to designasimple trading strategy.

This report utilizes the following datasets:

• 15-minute frequency trading data for the top 10 cryptocurrenciesby market capitalization;

• 15-minute frequency sentiment indicators (CO-A-02-01andCO-A-02-05) for the top 10 cryptocurrencies by market capitalization.

This report uses the average value of sentiment indicators over apast period as the sentiment anchor and constructs trading signals basedonthecomparison between current sentiment and the sentiment anchor.

2.2.1 Positive sentiment

The indicator “CO-A-02-01” represents the user’s positive sentiment towards a specific cryptocurrency.

This report sets the parameter n to 20, meaning it calculates the averageusing investor sentiment over the past 20 time periods.

2.2.2 Sentiment Consistency

The indicator “CO-A-02-05” represents the consistency of users’ sentiment towards a specific cryptocurrency.

Based on the trading results driven by positive sentiment, it canbeobserved that BTC and SUI have exhibited excess returns that are distinct from those of other cryptocurrencies.

Similarly, based on the trading results driven by sentiment consistency, it can be observed that BTC and SUI have exhibited excess returns distinct from those of other cryptocurrencies.