Predicting Bitcoin Returns: Comparing the Roles of Newspaper- and Internet Search-Based Measures of Uncertainty

We compare the ability of a newspaper-based measure and an internet search-based measure of uncertainty in predicting Bitcoin returns. Based on monthly data, we show that Bitcoin is a hedge against both measures. However, the predictive ability of the internet-based economic uncertainty related queries index is statistically stronger than the measure of uncertainty derived from newspapers in predicting Bitcoin returns, which is possibly due to the fact that the former measure of uncertainty is directly obtained by the individual investors, based on their search of the internet for terms related to uncertainty. This result is confirmed by various additional analyses.