Market capitalization of crypto currency this week fell to $190 billion. Cheaper bitcoin and almost all altcoins, cryptocurrency, however, with a nine-year history at a slower pace, with the result that its market share grew to a new high of the year — 54%. Compared to the record value of $20,052 reached on 17 December last year, bitcoin was at $6,000, losing about 70% of the cost. As told 12 Aug Tom Lee, head of Fundstrat Global Advisors, his organization tracks the dynamics of the movement 50 of the cryptocurrency, and «they are moving in the same direction.» He admitted that Fundstart just started to begin to «divide the market into sectors».
What affects the bitcoin and cryptocurrency market and what they do themselves? One study of this issue is a report published by analysts at Yale University Yukun Liu and Oleg Tsyvinski. First, they do not put the final point in this question because «the circumstances in the market are changing rapidly» and, secondly, the authors come to a paradoxical conclusion: «the main result of the study is that cryptocurrencies are a class of assets that can be estimated using simple financial instruments. At the same time, cryptocurrencies represent an asset class that is radically different from the traditional assets.» At Yale University claim that «there is very little reason to believe the widespread belief that there is a correlation between the change in the prices of cryptocurrencies and traditional assets.»
Don’t know when to buy bitcoin? Correlation to help
In many ways, for researchers of bitcoin has remained a «thing in itself». They studied mainly three cryptocurrencies — bitcoin, ether and ripple. One of their conclusions is that in the case of price rise of these cryptocurrencies by 20% during the week, the rise continues for the next seven days, which means that after fixing the first rise should buy a bitcoin, which is a similar pattern was observed most strongly.
Despite what many will argue, «cryptocurrency unsecured», the probability of devaluation of Bitcoin to zero evaluated at Yale 0.4% for Ethereum — 0.3%, and Ripple — 0.6%. This shows that the cryptocurrency is «immunity» as to the negative impact of regulation and crises in the world of traditional Finance. Tom Lee believes that the new trend: the production of tokens on the basis of a variety of traditional assets will lead in the future to what the cryptocurrency market will begin to behave exactly as securities on wall street, and so we can conclude that he will not be available now he has independence.
Yale said that and independent cryptocurrency market can be analyzed. So, according to their estimates, the increase in the number of queries in Google for the word «Bitcoin» for 1% of the average value of two weeks leads to an increase of bitcoin prices by 2.3% in the coming fortnight.
When analyzing tweets, researchers from Yale came to the conclusion that the growth during the week the number of tweets that have the word «Bitcoin», which is 1% of the average value associated with the increase in the price of the cryptocurrency at 2.5% next week. Analysts Linus, Roxburgh and Simon Sadman confirm this: according to their calculations, the correlation between positive tweets about bitcoin and cryptocurrency market is 80%.
How media reports affect the dynamics of the cryptocurrency market? For example, the news that the owner of the new York stock exchange, ICE, intends to open a cryptocurrency platform Bakkt, are unable to support the market, said analyst Maltem Demirors. In her opinion, it is necessary to look for «metrics», affecting which could cause the price growth of the cryptocurrency.
In the study by experts at Goteborg University, Yeni Asplund and Felicia Ivarsson concludes that the intensity of use of the topic of cryptocurrencies in the media is often negative, exacerbated by the downturn of the market of cryptocurrency, and that thus the corresponding correlation. However, a more accurate was to determine the following relationship: the more positive information on this subject in the media, the higher dynamics of the market of cryptocurrency, and Vice versa.
Analysts at Yale University have found that cryptocurrencies are immune to the movements of key Fiat currencies, particularly the US dollar when the us currency becomes more expensive, this does not necessarily lead to lower prices crypto-assets, though in the majority of other asset classes such correlation is observed. For example, the behavior of the price of an ounce of gold, expressed in US dollars, it is in the current year is at the lowest level, while the U.S. currency strengthened against most currency units in the world.
Cryptocurrency affect the most important institutional investors — the index of the wall street
At the same time, the bitcoin affects the dynamics of the key stock indexes in Japan (Nikkei 225), South Korea (KOSPI) and the USA (S&P 500), starting with at least 2017 — to such conclusion came researchers from the University of Incepere. These countries are in the TOP 3 on the turnover of cryptocurrencies, so we can say that the dynamics of bitcoin prices in these countries began to play the same role that a change in, for example, the price of oil, with the largest impact was seen in the United States. Great interest in cryptocurrencies has led to the following observation: companies that use the name blockchain — the underlying technology amount of cryptocoins have the best dynamics of the rate of their shares in 58% of cases after the announcement of the renaming of their business, and this effect lasts for the first five days and persisted for at least another 90 days.
Thus, we see that cryptocurrencies and the underlying technology behind them can not only be influenced from outside factors, but they themselves are the circumstances that affect other assets, in particular shares and stock indices. It really means a lot: maybe the nervousness of wall street, which is manifested in the desire of some players to enter the market of cryptocurrency, simultaneously criticizing it as just a manifestation of fear of competition that brought about cryptocurrency?
The correlation search, where it is not
While the dynamics of the cryptocurrency market remains largely unpredictable, this frankly tells Samson Moy, the chief strategist in the blockchain developer Blockstream Corp. For example, there is an attempt to link market movement with one or another decision of the American Commission on securities and exchange Commission (SEC). However, this is clearly the after the fact analysis, and secondly, we are talking about fairly rare events, to be able to build a reliable correlation. It is impossible to explain any market movement (e.g., a decrease, as it is now) what happened before (for example, the failure of the SEC on the approval of the application of Gemini Trust Co crypto currency exchange to launch ETF on bitcoin) — on this logical error wrote Nobel laureate for Economics Daniel Kahneman in the book «Think slowly… Decide fast.» He warned that one cannot automatically attribute the cause of subsequent events in the markets what was before him, even if this conjunction of events is observed quite regularly.
Bitcoin is perfectly confirms this thesis: it is enough to remember how wrong some analysts, when he suggested that the conduct of the may 14 regular new York conference Consensus will increase the price of cryptocurrencies as it used to, c 2015 to 2017, when this correlation was observed, as mentioned by Tom Lee. This correlation this year has not worked.
«Simple financial instruments» in the context of cryptocurrencies can leave in the past
It seems that the attempts to establish a correlation of bitcoin with some events and facts are going down the wrong path. First, Nassim Taleb with his book «Black Swan» and further in subsequent work clearly demonstrated that those «simple financial instruments» market analysis, which are used by experts of Yale, are not perfect and are often unable to give the correct answer. Secondly, in the era of drastic changes in the financial world and cryptocurrency in terms of impact and compare with the Internet and with the invention of electricity and the steam engine, writes about the strategist of IMF Martin Muhleisen, — hardly it is expedient to assume that the «after integration» of cryptocurrencies with traditional financial markets, they will behave like a «normal» securities.
Integration would be possible if there would be confidence that stock markets and banks will remain fundamentally the same form in which we know them for centuries. It is obvious that cryptocurrencies is not just another asset class «for collection» new York stock exchange, and the fact that the ability of its technology to replace wall street. Cryptocurrencies are a way of treating the traditional financial system, which makes unnecessary all other medicines. Finally, third, the fact that bitcoin does not depend on the many assets that is similar to gold, so it has been called «the new digital gold.» Even gold is less «whatever», because its price fluctuates along with the increase or decrease of the dollar index, which measures the value of the American currency to a basket of key currency of the world, unlike bitcoin.
Indeed, the human analyst Ryan Selkis, which explains why the market did not rise after the news about Bakkt: ICE only creates an additional channel offerings for cryptocurrency. But the fact that we need a «demand shock», which says Selkis not to agree: it is unlikely that the value of technology and the changes that bring you into the world of cryptocurrencies is generally estimated through the market capitalization of cryptocurrencies and bitcoin in particular. It’s like that to determine the «price» the discovery of electricity cost of all of the issued light bulbs.