Is Bitcoin rooted in confidence? – Unraveling the determinants of globalized digital currencies

•This study shows the relevance of estimating Bitcoin user sentiment (measured by the Bitcoin Misery Index) based on trade data.•Confidence of Bitcoin users depends on their feelings and sentiments regarding this disruptive technology.•The BMI impacts Bitcoin returns in the short and long term, and this effect is nonlinear and asymmetric. Although previous studies have shown the impact of sentiment on Bitcoin price, they have not produced clear and consistent empirical results regarding two main questions: how is sentiment measured and what are its effects on Bitcoin price over time? To address this gap, we develop an innovative empirical approach based on Bitcoin sentiment, drawing on trade data rather than judgments of individuals who are not actual Bitcoin users, as well as on the autoregressive distributed lag model and the nonlinear autoregressive distributed lag model, both of which capture the asymmetric effects of explanatory variables. In addition to revealing a significant impact of the Bitcoin Misery Index (BMI) on short- and long-term Bitcoin returns, this paper highlights the nonlinearity and asymmetry of this relationship in the short and long run, as well as the relevance of estimating Bitcoin sentiment using trade data.