Yukun Liu and Aleh Tsyvinski conclude that the momentum of the market and the attention of investors are two more important factors for the forecast of the BTC value
The extreme volatility of the market is considered one of the largest problems when it comes to investments in cryptocurrency. However, economists at Yale University have designed a technique that would presumably be able to predict the future value of Bitcoin and some altcoins.
No need for a crystal ball
In the wake of Bitcoin's bearish trend, when the BTC swooped $ 7,000 once again, encryption enthusiasts seek another price rally. While this recent downtick has obviously been caused by the postponement of the SEC, it is rather difficult for a normal trader to predict the market reaction.
Luckily, Yukun Liu and Aleh Tsyvinski, the two Yale economists, have come up with a research paper that clearly shows which factors can identify another change in value. Their findings are based on the history of Bitcoin prices covering almost seven years. They also tried to determine if cryptographic resources move with legal currencies and currencies. As a result, the pair found two indicators that could prove useful for investors.
The "momentum effect"
First of all, the research emphasizes that Bitcoin tends to have a strong upward momentum. For example, if the price of BTC suddenly starts to rise, there will be at least a couple of rises before they fall again. It is worth investing in Bitcoins if the price of the currency has increased by more than 20% compared to the previous week. The study also concludes that Ethereum has a significantly weaker moment compared to Bitcoin or Ripple.
The "investor attention effect"
Liu and Tsyvinski also studied the impact of investor attention on the price of a specific cryptocurrency. This factor is measured by the amount of Google searches during a certain period of time. Their conclusion basically states the obvious: more online attention corresponds to a greater increase in value.
They also tried to find out how the negative attention of investors affects the market. To this end, they analyzed the radio of the "Bitcoin Hack" and "Bitcoin" searches. In the result that the negative news cycle inevitably leads to lower yields of BTC during the following week.