The 68 page report outlines a variety of factors that the authors allege can help investors predict cryptocurrency price fluctuations.
According to the introduction, the aim of the research was to ‘establish that the risk-return trade-off of cryptocurrencies (Bitcoin, Ripple, and Ethereum) is distinct from those of stocks, currencies, and precious metals.’
The full report can be found here
"Stong time-series momentum effect"
One of the key findings was what the report calls the Among these factors is a “strong time-series momentum effect.”
Authors Tsyvinski and Liu argue that if the price of Bitcoin increases over a week, it is likely keep growing over the following week.
The researchers note that a sharp increase of Bitcoin’s price stimulates higher demand in the market, which leads to bigger investments.
The study says that the “momentum effect was stronger” for Bitcoin, but was “still statistically significant” with Ethereum and Ripple.
Apart from the momentum effect, the Yale researchers mention the factor of investor attention, which is a correlation between crypto prices and the number of posts and queries for cryptocurrencies on social media and in search engines.
Ultimately, Tsyvinski states: "All things can happen. Maybe the statistical patterns that we find are going to completely change. Maybe tomorrow Bitcoin is going to be prohibited by regulators, maybe it's going to be completely hacked, there are many things one would take into account."
Cryptocurrency is a recent phenomenon that is receiving significant attention.
On the one hand it is based on a fundamentally new technology, the potential of which is not fully understood.
On the other hand, at least in the current form, it fulfils similar functions as other, more traditional assets.
Is cryptocurrency a form of a currency, a commodity, a stake in a technology breakthrough, or a completely different instrument?
Can cryptocurrency be priced by the factors available for other asset classes?
Which industries may be affected by the development of blockchain technology?
The report offers valuable insights into these pressing questions.