New Study: Google Search Volume Can Predict Crypto Price Movements

New Study: Google Search Volume Can Predict Crypto Price Movements

Cryptocurrency News
August 10, 2018 by Jane
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A newly conducted study conducted by two Yale University economists, Yukun Liu and Aleh Tsyvinski, suggests Google search volume can predict the future price movements of top cryptocurrencies like Bitcoin, Ethereum, and Ripple’s XRP. The study, titled “Risks and Returns of Cryptocurrency is based on a financial model called capital asset pricing model or CAPM. It states
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A newly conducted study conducted by two Yale University economists, Yukun Liu and Aleh Tsyvinski, suggests Google search volume can predict the future price movements of top cryptocurrencies like Bitcoin, Ethereum, and Ripple’s XRP.

The study, titled “Risks and Returns of Cryptocurrency is based on a financial model called capital asset pricing model or CAPM.

It states that a one-standard-deviation increase in the Google search for Bitcoin yields a 2.3 percent increase in the next two weeks.

The paper argues that “high investor attention predicts high future returns over a 1-2 week horizon for Bitcoin, a one-week horizon for Ripple (XRP), and 1-6 week horizon for Ethereum.”

On the other hand, the study further found that negative investor attention sees crypto markets fall. When Google searches for “Bitcoin hack” increased, the cryptocurrency’s price dropped by 2.75% within a week.

According to the paper,

Our main conclusion is that indeed cryptocurrency represents an asset class that can be assessed using simple finance tools. At the same time, cryptocurrencies comprise an asset class which is radically different from traditional asset classes.

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