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The Possibility of Crypto Price Prediction

August 9, 2018


On Monday, a Yale economist and a PHD candidate in his department publicly announced that they had found a way to predict price trends in what they call the “major cryptocurrencies,” which appeared to actually refer to Bitcoin alone.


Despite this, in the announcement, it was clarified that the study was actually published based on a seven year analysis of Bitcoin, Ripple, and Ethereum.


The researchers, Aleh Tsyvinski and Yukun Liu, have claimed that their findings are significant, which appears to be true, given the facts.


Cointelegraph reported that the team’s major finding was that these three Cryptocurrencies appear to have no real connection to the movement of the traditional stock market.


Furthermore, the study also found that the movement of these three Cryptocurrencies does not correlate with the movement of traditional currencies, commodities or other macroeconomic factors.


With all of this, their overarching conclusion was that related to price movements, Cryptocurrencies are only correlated to factors specific to their market.


You might be wondering at this point: what do we mean by these market specific factors?


One example is what Tsyvinski and Liu termed, “a strong time-series momentum effect,” which appears to mean something like if Bitcoin’s price consistently increases in the course of a week, then it should do the same in the next week.


Related to this, the team found that a significant, quick jump in Bitcoin’s price means a significant jump in demand, which in turn means, more investments in the market.


In connection with this, they said that the same seems to happen with Ethereum and Ripple, but at a smaller scale. Since this further connection has been proven in a quantitative study, it just might silence a few critics of these other networks, especially those who seem to consistently stand against Ripple’s progress.


The same report by Cointelegraph on the study mentioned one more market specific factors, which they call “investor attention.” This boils down to the idea that the price movement of these Cryptocurrencies is correlated with how many posts appear on social media and how many searches are done on Google, on Crypto related topics.


Given that this study apparently used 354 industries in the USA, as well as 137 in China to run its numbers, it can be taken as reliably executed and therefore, presenting valid findings.


As time goes on, it will be most interesting to see how other researchers try to add to this, especially with the difficulty of almost no correlation existing between Crypto and traditional markets.


Because this is true, discovering more quantitatively based market specific factors will be an undertaking since researchers will have to do so without historical information to compare the Crypto market to.



By: BGN Editorial Staff


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