Fusion: Practice and Applications FPA 2692-4048 2770-0070 10.54216/FPA https://www.americaspg.com/journals/show/3085 2018 2018 Business Administration Department, Faculty of Commerce, Tanta University, Tanta, Egypt Ahmed Ahmed Economics and Public Finance Department, Faculty of Commerce, Tanta University, Tanta, Egypt Farouk F. Elgazzar Tashkent State University of Economics, Tashkent, Uzbekistan; Business Administration Department, Faculty of Commerce, Mansoura University, Mansoura, Egypt Noura Metawa This research investigates how Egyptian investor sentiment affects cryptocurrency returns, focusing specifically on Bitcoin. We utilized an enhanced investor sentiment index in Egypt, constructed through factor analysis of various literature-based variables. Our study's findings revealed a notable positive correlation between the investor sentiment index, lagged by one order, and Bitcoin returns, as per the estimation and analysis using VAR models. Analysis indicates that a one standard deviation change in the investor sentiment index leads to an alteration in the influence of each standard deviation of the original positive variable, resulting in a switch from positive to negative and vice versa in the medium and long term. Regarding variance decomposition, the short-term variance error of 100% is primarily explained by Bitcoin returns themselves. However, in the medium to long term, besides Bitcoin returns, the investor sentiment index emerges as the most influential variable affecting Bitcoin returns. Causality tests reveal a unidirectional short-term impact from the investor sentiment index to Bitcoin returns via Granger causality tests. Additionally, using the Toda-Yamamoto causality test, long-term bidirectional effects between Bitcoin returns and the investor sentiment index were observed. 2025 2025 26 52 10.54216/FPA.170103 https://www.americaspg.com/articleinfo/3/show/3085