Study says investor sentiment influences Cryptocurrencies prices
A recent study by the Warwick Business School states that the whims of investors dictate the prices of Cryptocurrencies. The study also argues that economic indices do not play a significant role in defining market dynamics. In short, Cryptocurrencies are only as good as what people are willing to pay for.
Daniele Bianchi, Assistant Professor of Finance at Warwick Business School, is the author of this research. The study examined the 14 main Cryptocurrencies according to their market capitalization. The main conclusion drawn was that media hype and emotion played the most significant roles in determining whether the price of a Cryptocurrency increases or decreases.
According to Bianchi, unlike the USD, whose value is based on many parameters such as trade deficits and interest rates, Cryptocurrencies prices are based on feelings about the platform and the resulting projects. Bianchi also added his voice to the Cryptographic bubble story by saying that the market has striking similarities with the Internet bubble of the late 1990s and early 2000s.
Thus, he expects that many of the current digital token projects will collapse once the bubble burst. The finance professor then stated that Crypto investors, therefore, must find the “Amazon” of the Crypto market. This previous statement is a reference to the fact that Amazon was one of the few companies to survive the dot-com crash.
Gandham says that the feelings of investors alone do not take into account the value of Cryptocurrencies. While on the subject of value, the USD and many other fiduciary currencies operate on faith, a belief in the government’s ability to maintain value. If that’s not investor sentiment, what is it?
Martin Weiss of Weiss Cryptocurrency Ratings recently provided a robust refutation of Warren Buffett’s rhetoric that “Bitcoin has no value”. Weiss identified three distinct value levels for Bitcoin, namely intrinsic value, monetary value and exchange value.