NBER: Google search can predict the rising price of Bitcoin
According to a recent study, published this week by the National Bureau of economic research (NBER), in contrast to traditional financial markets cryptocurrency markets move depending on the growth of the attention that is given to them. Instead, they work closely with the “specific factors of cryptocurrency”: the attention of investors and market momentum.”
The report’s authors, specialists in Economics Yale University Yukun Liu and Aleh Tsyvinski, suggest that, contrary to public opinion, markets do not consider cryptocurrencies as a standard asset class.
Using data series on prices of BTC, XRP and ETH for long time periods, the authors compared actual revenue with forecasted revenue using standard financial model, known as CAPM. Liu and Tsyvinski compared the profitability of cryptocurrency with a yield of traditional currency, the Euro, gold and macroeconomic factors such as consumption growth.
It is noteworthy that this study includes data on consumer search activity on the forums, such as Google and social networking sites, such as Twitter. The increase in the standard level, the search keywords such as “bitcoin”, showed the increase in the price of the token in the next week. So, according to the report, on average, a deviation in the search led to increase in prices of 2.75 per cent. Similarly, the increase in messages on Twitter has led to the increase in the price of bitcoin at 2.5%. However, the increase in information search about the break-ins showed a decrease in the price of bitcoin.