The NBER suggests that the cryptocurrency market doesn’t behave or respond to the same set of market factors as traditional financial instruments but instead, move more closely with “cryptocurrency specific factors,”
NBER incorporates data from consumer activity on search forums such as Google and social media sites such as Twitter. It found that a standard deviation increase in searches for keywords such as “bitcoin” forecasted a small increase in the token’s price in the following weeks.
The paper cited CoinDesk’s bitcoin, ethereum and XRP price trackers (referring to XRP as “ripple”) as the source of its market data. Using price data series over multi-year time frames, the paper compared actual returns to the projected returns using a standard finance pricing model known as the CAPM.
The study was conducted by Yale University economists Yukun Liu and Aleh Tsyvinski, suggest that, contrary to public opinion, “the markets do not view cryptocurrencies similarly to standard asset classes.”
Liu and Tsyvinski go on to compare cryptocurrency investment returns to that of traditional currencies such as the euro, metals like gold and macroeconomic factors such as consumption growth.
On average, a single standard deviation increase in the keyword search lead to a 2.75 percent price increase, according to the report.
Could it be more to do with visibility factors?