It can predict the market trend of bitcoin and cristobalite in the short/medium term?
At a time when the industry is experiencing losses of over $ 30 billion, the question is certainly topical. And someone tried to give an answer. This time it is not about bitcoin exegetes (or its avid detractors). But by two economists from Yale University: Aleh Tsyvinski and Yukun Liu, have published a study entitled Risks and returns of cryptocurrencies, where they explain how the volatile market of bitcoin and related products can be interpreted and anticipated.
The first thing to be aware of is that cryptocurrencies cannot be understood using the macroeconomic factors that usually affect the stock, currency, and commodity markets. But, there would be other common strategies, able to better interpret the trends of the cryptomarkets. To find them, Tsyvinski and Liu analyzed historical data of the most popular currencies, including bitcoin, ethereum, and ripple, noting two key factors that could predict market trends. And they called them to affect momentum and investor focus effect.
The first, the momentum effect (English: momentum), is known to traders as the tendency of a market that has been rising for a certain amount of time to continue in the same direction. In practice, it is based on the comparison of trends over the course. For example, according to the two Yale economists, a consistent weekly price rally - over 20% - should be taken as a sign to buy cryptocurrency. Investors should therefore hold onto a cryptocurrency for at least a week before selling it at a profitable margin.
Likewise, further downward momentum - again once a week - should be seen as a signal to get out of the market quickly, before the risk escalates. " The momentum effect is actually something simple, " Tsyvinski said: " If the prices go up, they keep going up on average, and if the prices go down, they keep going down ."
Different and, in some ways surprising, the "investor attention" effect, which is based on more unpredictable " social trends ". By examining the Google Search variations for the keywords bitcoin, ripple, and ethereum and comparing the weekly outcome with their respective price data, the two economists found that the average increase in search queries for each currency would indicate that its price will increase in the coming weeks, as a study by Semrush already suggested, about which Wired wrote a few months ago.
The conclusion? Those who want to invest in bitcoin and other cryptocurrencies must think differently, and want to be unprecedented, compared to traditional trading. " Our results - says the study - put in doubt the explanations spread that the behavior of cristobalite depends on their ties to the blockchain technology, as would happen with stocks, currencies, or as valuable deposits as commodities and precious metals. But their returns can be predicted by two specific factors: the momentum effect and the attention of investors ”.
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