More heat than light: Investor attention and bitcoin price discovery

We investigate how increased attention affects bitcoin's price discovery process. We first decompose bitcoin price into efficient and noise components and then show that the noise element of bitcoin pricing is driven by high levels of attention. This implies that high levels of attention are linked with an increase in uninformed trading activity in the market for bitcoin, while informed trading activity is driven by arbitrage rather than attention. •We explore the relationship between investor attention and price discovery in Bitcoin.•We separate Bitcoin returns into information-driven and noise components.•We use Google Trends as a proxy for investor attention.•We find that elevated levels of investor attention are associated with noise rather than with underlying value.