Blockchain of Fashion
Study says Cryptocurrencies are Affected by Emotion More Than Economic Factors
A new study says the prices of Ethereum, Bitcoin and other cryptocurrencies is determined by the mood of investors rather than any economic indicators.
There is research showing limited similarities between Bitcoin and gold, but looking across the 14 biggest cryptocurrencies the high volatility of their price means that they can hardly be seen as a reliable savings instrument in the short-term, let alone the long or medium term
Assistant professor of finance at Warwick Business School, Daniele Bianchi, discovered the price patterns among the largest 14 cryptocurrencies reflecting the past returns to investors, combined with hype and the emotion experienced as they watch the values climb or fall.

"There is research showing limited similarities between Bitcoin and gold, but looking across the 14 biggest cryptocurrencies the high volatility of their price means that they can hardly be seen as a reliable savings instrument in the short-term, let alone the long or medium term," Dr Bianchi said, whose working paper on the subject is called Cryptocurrencies as an Asset Class: An Empirical Assessment.

This behaviour can be put down to the fact bitcoin and other cryptocurrencies fall outside governmental regulation or that of financial institutions. Making an investment in digital currencies is, therefore, more akin to buying equity in a high-tech firm rather than in a normal currency, the study suggests.

The volatile price of bitcoin reflects core ideas of the study, having swung between $6,500 and $10,000 just within the last six weeks.

Dr Bianchi warned that the current cryptocurrency market is akin to the dot-com bubble between 1997 and 2001 which saw excessive speculation in internet companies on the part of investors, eventually resulting in collapse of many of the firms.

"As a result, the market for cryptocurrencies may look similar to the dot-com bubble at the end of the 1990s, and it may be that only a handful of them survive, so for investors, it is like selecting who will be Amazon now."