Financial experts from Yale University have proposed a system of factors to forecast price trends in major cryptocurrencies.
This was disclosed in an official statement issued by YaleNews.
The new study was done by Yale economist Aleh Tsyvinski and Yukun Liu, a Ph.D. candidate in the Department of Economics, and is said to be the “first-ever comprehensive economic analysis of cryptocurrency and the blockchain technology.”
In the paper, the authors seek to deliver a “risk-return tradeoff” of major cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP), according to past performance information.
The experts took a close look at the behavior of Bitcoin between 2011 and 2018, while Ripple and Ethereum data was monitored since their inceptions in 2012 and 2015, respectively.
In the research, Tsyvinski and Liu uncovered that cryptocurrencies “have no exposure” to most usual stock markets, as well as to returns of currencies and commodities and macroeconomic elements. Instead, the experts emphasize that “cryptocurrency returns can be predicted by factors which are specific to cryptocurrency markets.”
Among these aspects is a “strong time-series momentum effect.” Tsyvinski and Liu claim that if the price of Bitcoin rises over a week, it is possible that it keeps growing over the following week. The researchers took note that a steep increase of Bitcoin’s price influences higher demand in the market, which results in bigger investments. The study says that the “momentum effect was stronger” for Bitcoin, but was “still statistically significant” with Ethereum and Ripple.
Apart from the momentum effect, the Yale researchers cited the factor of investor attention, which is a link between crypto values and the number of posts and queries for cryptocurrencies on social media and in search engines.
“All things can happen. Maybe the statistical patterns that we find are going to completely change. Maybe tomorrow Bitcoin is going to be prohibited by regulators, maybe it’s going to be completely hacked, there are many things one would take into account.”
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