The value of Bitcoin in the coming days remains a subject of discussion amidst the cryptocurrency enthusiasts and the pessimists alike. The situation has made investing in cryptocurrency dicey for investors, as most are confused on the appropriate time to invest, and some that have invested are eager to know the future of cryptocurrency. What it will become in 2 to 3 months time or a year or two, to see if they should pull out or continue to speculate another massive boom.
The circumstance has been trailed different form of predictions from the enthusiasts and the pessimists. Many enthusiasts are like the prophet of good tidings, who continue to see cryptocurrency to rise above $18,000 before the end of the year, while pessimists see it as something that will still fail. The enthusiasts propose institutional acceptance of the digital currency and full acceptance while the pessimists only see the opposite, as government banning activities related to cryptocurrency.
Emotional proponents of the cryptocurrency boom have been seen while hypothetical proponents have also been observed. Amidst all form of proponents emerge an academic view from the prestigious Yale University economists, predicting what the future of Bitcoin, Ether, and Ripples will be, based on the historical perspective, and also the appropriate time to invest in cryptocurrency to gain profit, which is based on the analysis of events.
The two central proposition that causes the price of the cryptocurrency tagged “investor attention effect” and the “momentum effect.” These two propositions were made by professor Aleh Tsyvinski and Ph.D. Yukun Liu. Their academic work consists of a historical holistic view of what affects cryptocurrency from 2011 to 2018.
The “Momentum Effect”
The momentum effect is described by the scholars that it refers to the potential of the cryptocurrency to rise, which is, the tendency for a sharp increase next week will be trailed with a little gain this week. The time for that slight increase is described by Liu as the best time to invest in cryptocurrency, to sell the following week when there will some the sharp rise and make a profit.
The momentum effect is claimed to work more for a Bitcoin than it does for Ether and XRP cryptocurrencies.
The “Investors Attention Effect”
On the attention effect, cryptocurrency is said to be affected by the attention it received online. The online search rate on Google and other search engines determine the price of the cryptocurrency. It was stated that “for weekly returns, the Google search proxy statistically significantly predicts 1-week and 2-week ahead returns.” And the same trend goes with Twitter tweets. The attention can be negative or positive.
If the trend of positive attention trailed online during the week, the next 1 or 2 weeks would lead to increase in the value of cryptocurrency, and if the attention is the negative trend, the downward trend will follow it in the coming weeks. An investor can follow these trends to know the appropriate time to invest and sell.
It was also revealed in their findings that speculative investors can invest based on the tendency of government regulation and acceptance which will always be the game changer for everything.
Investment in cryptocurrency can follow these two trends, but as investors and traders, there must be consciousness of its volatility.