Crypto Frontline

There is a huge debate on what influences the price of cryptocurrencies the most. Since there is no central bank involved, the monetary policy steps aside, but still little economic aspects could be taken into account. There is the important news that comes from the company behind the cryptocurrency, but there is no significant news every day, so one could question what the main driver of the price is.

That is the question Daniele Bianchi asked, an assistant professor of finance at Warwick Business School. He made a study on all the biggest 14 cryptocurrencies and came up with an interesting paper we will discuss in the following.

Cryptocurrencies and emotions

As reported by independent.co.uk, the study conducted by Daniele Bianchi showed that the main driver behind the huge price swings had been represented by the emotions investors experienced when they saw the prices moving up and down. Basically, the mood of investors is one of the main drivers of cryptocurrencies, which is not quite a good news for those people wanting to invest in cryptocurrencies for the long term. The study is called “Cryptocurrencies as an asset class: an empirical study”.

As Daniele Bianchi had stated:

“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.”

Links with the regulatory debacle

Since the beginning of 2018, cryptocurrencies had been heavily under pressure and the main reason is the fear of regulation. Although the situation is much clearer now, with the G20 countries working jointly for a common regulation, the laws might pose some serious issues for companies that do not have an appropriate work ethic.

However, the situation could be tensed just in the short-term. One thing that raises confidence, in the long run, is the interest we see from big corporations. Goldman Sachs and Kodak are just two of them. That proves the blockchain technology can be very useful and in order to use it, in some cases a cryptocurrency is needed.

The big question now is what cryptocurrency will manage to thrive and overcome the current obstacles. Investors are trying to find those companies that will have an impressive performance in the future and who knows how things will turn out.