Public Sentiment Triggers Short-Term Disruptions in Crypto Market Liquidity, New Research Shows

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FORMOSA NEWS

Recent research by Ningyu Zhou from Al-Farabi Kazakh National University in 2026 reveals that public information stress directly affects trading fluidity in the cryptocurrency market. This finding is significant because it demonstrates how public sentiment and news exposure can alter the trading conditions of digital assets, rather than merely influencing their prices.

Historically, the crypto market is known to be highly reactive to news and investor emotions. However, most previous research has focused primarily on predicting price movements or market volatility levels. The question of whether public panic or negative news sentiment makes the transaction process harder and more costly has remained largely underexplored.

To find the answers, this study analyzed daily data from major crypto assets such as Bitcoin (BTC) and Ethereum (ETH). The research methodology combined historical crypto market transaction data with various information stress indicators. Public information pressure was measured using the Fear and Greed Index, news sentiment, and public attention levels through Wikipedia pageviews.

The research results outline several key findings:

• Trading frictions caused by information pressure mostly have only a short-term impact.
• Trading frictions based on the bid-ask spread respond to panic immediately, but the market can recover very rapidly.
• Disruptions to the Amihud illiquidity ratio adjust to market shocks more gradually.
• Overall, information stress only triggers temporary trading disruptions and does not cause permanent damage to crypto market resilience.

These findings provide insights and practical impacts for financial business players. Given the reactive nature of the market, crypto investors and traders are advised to anticipate the high risk of transaction execution failure that typically arises temporarily during periods of intense news. Ningyu Zhou from Al-Farabi Kazakh National University suggests that exchange managers and liquidity providers should actively monitor public sentiment indicators to detect short-term liquidity stress.

AUTHOR PROFILE

• Lead Researcher: Ningyu ZhouAcademic Affiliation: Al-Farabi Kazakh National University, Almaty, Kazakhstan
• Field of Expertise: Cryptocurrency market dynamics, trading frictions, and market liquidity resilience

RESEARCH SOURCE

• Article Title: Information Stress and Trading-Friction Resilience: Evidence from Public Sentiment and News Context in Cryptocurrency Markets
• Publication Year: 2026
• Journal / License: This article is distributed as an open-access article under the terms of the Creative Commons Attribution 4.0 International license

• DOI: 

  https://doi.org/10.55927/ijbae.v5i4.47