Financial experts at Yale University have suggested a system of factors to predict the price trend of major cryptocurrencies, according to an official statement by YaleNews on 6 August.
The new study was conducted by the economist of Yale Aleh Tsyvinski and Yukun Liu, a Ph.D. candidate for the Department of Economics, and reportedly is "the first global economic analysis of cryptocurrency and blockchain technology. ".
In the paper, the authors intend to provide a "risk-return compromise" of the major cryptocurrencies like Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP), according to its historical performance data.
Experts reported that they analyzed Bitcoin's behavior between 2011 and 2018, while the Ripple and Ethereum data were tracked from the beginning of 2012 and 2015, respectively.
In the study, Tsyvinski and Liu found that cryptocurrencies "have no exposure" to the most common stock markets, as well as currency and commodity returns and macroeconomic factors. Instead, researchers say that "cryptocurrency returns can be predicted by specific factors in cryptocurrency markets".
Among these factors there is a "strong effect of temporal momentum". Tsyvinski and Liu argue that if the price of Bitcoin increases more than a week, it is likely to continue to grow over the following week. The researchers note that a sharp increase in the price of Bitcoin stimulates greater demand in the market, which leads to greater investment. The study states that the effect "momentum was stronger" for Bitcoin, but was "still statistically significant" with Ethereum and Ripple.
In addition to the momentum effect, Yale researchers mention the investor's attention factor, which is a correlation between cryptography prices and the number of posts and queries for cryptocurrencies on social media and search engines. Ultimately, Tsyvinski states:
"Anything can happen, maybe the statistical models that we will find will change completely, maybe tomorrow Bitcoin will be banned by regulators, maybe it will be completely violated, there are many things one would consider."