research reportresearch report. Different from general technical analysis methods, it introduces quantitative research methods.
The challenge of applying quantitative analysis to cryptocurrencies is that we know nothing about the factors that affect their prices. For example, Buffett has always been skeptical of cryptocurrencies, and he may think that the only factor affecting the price of cryptocurrencies is how much investors are willing to pay. Obviously, this view is obviously subjective; on the other hand, most analysts believe that the price of cryptocurrencies is affected by economic market factors. These ideas seem to make sense logically, but have not been tested statistically.
In Research, Professor of EconomicsAleh Tsyvinskiand Ph.D. in EconomicsLiu YukunThrough historical data analysis of mainstream currencies such as Bitcoin, Ripple, and Ethereum, a mathematical model is constructed to analyze potential factors affecting cryptocurrency prices.secondary title
Cryptocurrencies and Stocks
To determine the correlation between cryptocurrencies and stocks, Aleh introduces a stock return analysis modelCAPM-Fama. The model is developed based on the Capital Asset Pricing Model (CAPM) model, that is,expected rate of return on assetsimage description
Analysis results of Bitcoin price based on CAPM-Fama model
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Cryptocurrency vs. Fiat Currency
Five fiat currencies, the Australian dollar, the Canadian dollar, the euro, the Singapore dollar, and the pound sterling, were selected in the study to assess the correlation between cryptocurrency prices and fiat currencies. It is found from the table that the difference between the absolute return of an investment or fund and the expected risk return calculated according to the β coefficient, that is, the Aplha coefficient is not much different. Combined with research on Ripple and Ethereum, there is no consistent evidence that cryptocurrencies are systemically risky compared to fiat currenciesimage description。
Currency Exposure to Bitcoin
Based on Lustig, Roussanov and Verdelhan et al. for "Common Risk Factors in the Currency Marketimage description
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Cryptocurrencies and Commodities
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Commodity Exposure for Crypto Earnings
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Cryptocurrencies and Macroeconomic Factors
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What Factors Affect Cryptocurrency Prices?
Quantitative research has found that the price of cryptocurrencies has no obvious correlation with stocks, commodities, fiat currencies, and macroeconomic factors. What exactly affects its price?secondary title
Crypto Momentum
Momentum, a classic factor in the economy that is associated with almost all asset classes. Conceptually, momentum quantifies the propensity of an asset to appreciate in value after a small increase in the economy. while the research focuses ontime series momentum, that is, assets with an upward trend in the past have a greater probability of continuing to rise, while assets that have fallen have a stronger motivation to continue to decline.
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Investor attention
When looking at whether investor attention has an impact on cryptocurrency prices, the researchers looked at the deviation of Google searches for "bitcoin," "ripple," and "ethereum" from the previous four-week average. Taking Bitcoin as an example, it can be found from Table 19 that for every standard deviation increase in the search volume of the keyword "Bitcoin" this week, the return rate in the next week and two weeks will increase by 1.84% and 2.30% respectively.
Additionally, the study, based on a study of investor activity data on social media sites such as Twitter, found that an increase in the standard deviation of search keywords such as "bitcoin" predicted a slight increase in cryptocurrency prices over the next few weeks. rise. A one standard deviation increase in the number of Twitter posts would result in a 2.5% price increase. The study called this influencing factor "investor attention".
On the basis of analyzing price factors, the study also investigated the cryptocurrency risk exposure of 354 SIC industries in the United States and 137 CIC industries in China through a more refined industry classification, indicating that blockchain technology is affecting more and more industries. .
Whether it is using traditional financial analysis tools or using mathematical thinking to interpret cryptocurrencies, the results may only stay at the theoretical level. In the financial literature referenced by Aleh, there are more than one hundred factors that affect the cross-sectional price of stocks. Regardless of whether these factors have an impact on the price of cryptocurrencies, the idea of the collision of cryptocurrencies and mathematical thinking is worthy of recognition. As a new asset class, the momentum factor and investor attention are only one of the factors that affect the price of cryptocurrency, and there must be new factors that affect its price.
