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.

Only 8% of Chinese College Students Own Crypto, Survey Finds

  • New survey shows eight percent of Chinese college students have invested in crypto.
  • 67% of respondents were familiar with bitcoin and 31% knew of ethereum.

A new survey shows that 8% of Chinese college students own some form of cryptocurrency and more than a quarter would prefer to work in the industry of blockchain after graduation. 

According to the survey conducted by local news outlet PANews, a significant number of Chinese college students have invested in cryptoassets.

 While 23.4% of college students indicated they did not know anything about blockchain, 8% said they were holding cryptoassets. An additional 9% of respondents said that while they had previously invested in the cryptocurrency space, they were no longer doing so, presumably out of market volatility. 

Two-thirds of respondents said that they were familiar with bitcoin, with 31.6% reporting that they were aware of Ethereum. Only 4.2% of those polled indicated that they knew crypto “very well.” College students appeared to be unfazed by media reports on crypto and blockchain, with 40% of those polled saying media reports on the industry were “influential, but have little impact.”

Blockchain education also made a strong appearance in the survey. While colleges and universities across the globe are working to establish nascient blockchain programs, 26.7% of respondents said they would choose to work in the industry following graduation. Students majoring in economics, management and engineering were overall more familiar with crypto-assets and indicated a higher interest in blockchain.

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