The markets of cryptocurrencies changes as per the attention they get, they do not behave like the conventional financial markets, National Bureau for Economic Research suggests in their recent study. Unlike the other traditional assets, the cryptocurrencies respond or behave in a different way to the market factors. They move according to the specific factors of cryptocurrencies, according to a report published in this week.
The factors for cryptocurrency include market momentum and investor attention, which are described as continuous time cryptocurrency momentum occurring at daily & weekly frequencies. Two economists from Yale University, Aleh Tsyvinski and Yukun Liu said that the cryptocurrencies are not considered similar to that like standard assets by the markets. The recent paper refers to Bitcoin, Ripple and Etherium as a source of their market data. By using this series of price data for longer time frames, a paper has compared the actual returns with the expected returns by taking the help of a financial pricing model called as CAPM.
Tsyvinski and Liu compared the returns of cryptocurrencies with the traditional currencies like euros, gold, metals and other macroeconomic factors. They suggested that the increase in price across 1, 3, 5 or6 days can be easily predicted by single day return, and the weekly return can be predicted by a 1, 2, 3 or 4-week movement of the market.
The data required for this study has been received from the consumer activities which are present on search platforms like Google and other social media apps like Twitter. The study also shows that the number of searches related to the keyword “bitcoin” has increased which will result in the increase in token price during the coming weeks. An increase in standard deviation of single keyword leads to 2.5% in the bitcoin’s price. Whereas, some changes in the search of keyword “bitcoin hack” resulted from a minute decrease in the price of bitcoin.
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