A new Yale study shows that you can better assess the price increases of the crypto currency with Google and Twitter. And maybe even suspect one or the other crash.
In addition to the policy of Donald Trump, there are few things that are as influential and fluctuate as strong as the course of Bitcoin. How little the Bitcoin class is related to traditional economic factors and how much it is related to hype and sentiment, a new study by Yale scientists Yukun Liu and Aleh Tsyvinski shows.
2 factors affect the price: momentum and attention
The results of Liu and Tsyvinski are based on the price data of around seven years. Factors that are of interest to classical currencies and precious metals like gold, the Yale researchers say, are keeping Bitcoin cold. Instead, they identify two other factors that influence the price: attention and momentum, that is, the momentum with which the price is just rising or falling.
- Momentum According to the researchers, it is thus possible to conclude price increases in one day over the next three to six days. From the actual price development over a week could close on the price development of the next two to three weeks. The crypto-currencies Ether and Ripple, the study says, are not as dependent on their own momentum.
- Attention The fact that the Bitcoin price correlates strongly with the attention that the cryptocurrency receives should not come as a surprise to observers. However, Liu and Tsyvinski have taken this attention-price-dependency into new figures: If the search queries for Bitcoin on Google by one standard deviation, according to the researchers with a price increase of 2.75 percent in the next few weeks is to be expected. By contrast, if the mention of Bitcoin increases by one standard deviation on Twitter, a price increase of 2.5 percent is to be expected in the coming weeks.
If a lot is searched for “Bitcoin Hack”, the price drops
However, attention can also backfire: If the number of mentions and search queries for the term “bitcoin hack” increases by one standard deviation, the price threatens to decline over the next few weeks.
Roughly, one could break the results as well: If the price rises, then it rises first. If he falls, then he falls first. If the crypto scene is afraid that it will fall further, it probably falls even further. If the scene thinks he’s going up, he’ll probably go further. That’s not surprising. But at least we can say that the Bitcoin price is more reliable than Donald Trump. Since you can not calculate the political direction by standard deviation of tweets, which seems to be more complicated.
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