Yale Researchers Study Factors Behind Cryptocurrency Price Shifts

On August 6, Yale economist Yukun Liu and PhD candidate Aleh Tsyvinski published a working paper titled Risks and Returns of Cryptocurrency. In it, they argue that there are several factors that predict price trends of some of the most popular digital currencies. The study is said to be “the first-ever comprehensive economic analysis of cryptocurrency and the blockchain technology upon which it is based.”

The researchers start with the claim that many factors that are predictive of the prices of stocks, currencies, and precious metals do not apply to cryptocurrencies, and so calculating the risk-return tradeoff requires different methods. They then go on to discuss factors specific to the cryptocurrency markets, focusing on two that they find to be predictive of digital currency price trends: the “time-series momentum effect,” and the “investor attention effect.”