Volatility of traditional and green cryptocurrencies unveiled: analysing the symbiotic nexus with investor sentiment

This study investigates the notion of the varying unpredictable volatility in the prices of green and traditional cryptocurrencies, and its symbiotic relationship with investor sentiment. Accordingly, the structural time varying parameter vector autoregression (TVP-VAR) method is employed for the 1 January 2018–23 September 2022 period. The findings revealed variable relationships of the sentiment index (SI) with cryptocurrencies amid various economic situations. The stochastic volatility of Bitcoin and Ethereum peaked around January 2018, trending lower since then, and rising back from 2021 to 2022, particularly in early 2021 and early 2022. During the Russia–Ukraine conflict, the stochastic volatility of Cardano was lower than those of Bitcoin and Ethereum. The simultaneous relationship of SI to the Bitcoin, IOTA, Cardano, and Ethereum shock vary between positive and negative in 2021 before turning negative in 2022. Bitcoin’s initial reactions to a positive investor mood shock are insignificantly different from zero. These results of SI to positive Bitcoin and IOTA shock decrease during our sample except in 2021. The impulse responses of Bitcoin to positive Ethereum and Cardano shocks decrease in 2018 and fluctuate during 2021–2022 and these results of SI to these negative shocks are significant due to the COVID-19 duration. In summary, the findings provide a novel and comprehensive analysis of the interdependencies between investor sentiment, and green and nongreen cryptocurrencies. In particular, the stochastic volatility of the cryptocurrency classes highlights spikes of investor sentiment during the Black Swan events (the COVID-19, the Russia–Ukraine conflict). The research offers valuable insights and cautionary implications regarding the transmission of uncertainty, and policy implications for regulators and investors.