Yale University: Factors to predict the price of cryptocurrencies :

Yale University: Factors to predict the price of cryptocurrencies

According to 2 experts from Yale University, the risk-return trade-off in the cryptocurrency market would be distinct from other markets. In addition, the return on investment could be calculated using factors specific to this market.

The prestigious Yale University based in Connecticut in the United States has published a document in which macroeconomics experts explain that the market of virtual currencies does not look like that of equities nor that of precious metals such as gold.

Since 2011, Aleh Tsyvinski and Yukun Liu have been studying 3 crypto-currencies: Bitcoin (BTC), XRP by Ripple and finally Ethereum (ETH). According to both economists, crypto-currencies are not exposed to most traditional stock market factors and returns can be predicted by market-specific factors.

The report reveals that if the price of bitcoin increases sharply in a week, it should continue to rise the following week. Mr Tsyvinski said in an interview:

"It's actually something simple. If things go up, they continue to increase on average, and if things stop, they continue to fall, at least in the short term. "

Experts also mention a correlation between prices and the number of messages posted on social networks about cryptocurrency. The number of tweets would be an indication of investor attention. Finally, many searches for the term "bitcoin hack" would be synonymous with decline.

Also, a growth of Google searches for 'Bitcoin' would indicate that the price of bitcoin will increase in the coming weeks. For the XRP, Google queries would significantly predict the maximum 1-week returns for Ethereum over 5 weeks.

However, Mr Tsyvinski and Mr Liu said that "anything could happen" in the cryptocurrency market and that external factors such as regulations could have a powerful impact on prices.

In March, Tom Lee, a renowned Wall Street analyst, unveiled an index called 'Bitcoin Misery Index' to know the right time to invest on Bitcoin.