Research: Why Are Cryptocurrency Prices So Volatile?

Kevin O'Brien

New research carried out by Daniele Bianchi and Alexander Dickerson at the University of Warwick suggest well-informed traders with information asymmetries are driving big price swings by timing markets in a manner where others follow in their footsteps.

The information was revealed in the latest draft of a research paper entitled Trading Volume In Cryptocurrency Markets", compiled by Assistant Professor of Finance Daniele Bianchi and Alexander Dickerson, a Ph.D. student, both of the Warwick Business School.

The duo looked at intraday price and volume data from CryptoCompare to assert “that the interaction between past volume and returns positively and significantly predicts future returns," according to a release by the Warwick Business School.

Traders Drive Price Swings

The release noted how the findings remain consistent with exisiting models:

“consistent with existing theoretical models which postulate that informed traders who speculate on their private information are key drivers of the observed price changes.”

Bianchi wrote how “the cryptocurrency market is the perfect environment to exploit asymmetric information,” since its opaque nature gives those with information the ability to “time the market, make money, and drive the prices.”

The authors of the research tracked 26 cryptocurrencies across 150 exchanges to gather information about markets. The cryptoassets were tracked between January 1st, 2017 to May 10th, 2018, covering the boom and bust of the 2017 bull market.

Patterns With Other Asset Classes?

In the conclusion of the report, Bianchi and Dickerson wrote how their empirical evidence helps give more insights into the crypto market by offering comparisons with traditional ones like FX.

They explained how the evolving cryptoasset class “may not necessarily be different from long-established and more mature markets.”

However, previous research by Bianchi found no crypto trading correlations ‘with any economic indicators that investors would base decisions on or with commodities.’

In a working paper called Cryptocurrencies as an Asset Class: An Empirical Assessment, the professor explained how crypto pricing was influenced by previous returns and the emotions and moods of investors.

Verge (XVG) Mysteriously Jumps 11% After Mining Code Malfunction

 

 

Verge (XVG), a privacy-oriented cryptocurrency that has suffered various attacks throughout its history, has mysteriously seen its price jump over 11% in the last 24 hours, even after seeing mining code malfunctions that saw its developers consider a transition to Proof-of-Stake (PoS).

According to CryptoCompare data, XVG is currently up against the US dollar, even after seeing a small correction from its jump to a $0.071 high, up from roughly $0.0058. Given the price jump, the cryptocurrency is currently up by 9.6% in the last 30 days.

XVG's price performance in the last 24-hour period

Notably, it’s unclear what’s behind XVG’s rise, as the cryptocurrency has seen what various analysts perceived as bad news in the last few days. On the VergeCurrency subreddit, a thread on the price rise has seen various users question the price movement in the comments section.

Potentially connected to the rise is a mysterious tweet from Sunerok, Verge’s founder and lead developer, which reveals he accidentally shared a sign-up process that was only set to be revealed on Monday, March 4.

Verge made headlines last year, as it was hit with various 51% attacks after partnering with MindGeek, an adult entertainment firm that owns popular websites like Pornhub.

Verge’s Difficult Year

While Verge wasn’t the only cryptocurrency being hit with a 51% attack recently, it made headlines over its partnership with MindGeek and an upgrade it had that increased its privacy features.

As CryptoGlobe covered, back in April one attack on its network netted a malicious miner over $1 million worth of XVG tokens, and later on unusual mining data suggested another attack was taking place.

Although the cryptocurrency partnered with MnidGeek to see Pornhub and other websites in its network accept XVG as a payment method for its premium subscriptions, the adult entertainment giant later on partnered with TRON and Horizen, making it clear Verge wasn’t its exclusive cryptocurrency partner, as it had claimed.

Pornhub, in fact, later on partnered with PumaPay, a blockchain-based payment solutions provider, to enable recurring cryptocurrency payments. All of these partnerships took a toll on Verge, which has been creating various other partnerships of its own.

Recently, a mining code malfunction has seen the cryptocurrency’s developers consider moving it from a Proof-of-Work (PoW)-based consensus to a Proof-of-Stake (PoS) based one, as miners have been having a “difficult time setting up a working mining environment due to non-existing timestamps in Coinbase transactions.”