Many people often asked when is the best time to buy and sell Bitcoins. With its violent ups and downs, the price of Bitcoin may seem impossible to anticipate. In 2017, the digital currency started the year with a value less than USD 1,000, but for December the price of a single unit came to be worth USD 19,600. On Wednesday, the cryptocurrency fell USD 1,000 after the postponement, by the Securities and Exchange Commission of the United States (SEC), of a request to list a listed investment fund (ETF) backed by Bitcoin on the stock market.
It should be noted that historical data does not guarantee the future performance of an investment, and Tsyvinski and Liu are not giving financial advice, but their research reveals two factors that in the past served as revealing tools to predict the next Bitcoin movement.
2 things that we must take into account when buying and selling Bitcoins
The “impulse effect”
The first important factor is momentum: according to the report, if the Bitcoin price rises sharply for a week, it will probably continue to rise in the following week.
The momentum is actually something simple. The same behavior has been documented with respect to other asset classes such as stocks, bonds and currencies, and the same pattern is true in the case of cryptoactives, the economist said.
The impulse effect was more noticeable in Bitcoin than in ether or XRP. However, it was statistically significant for the three cryptoactives.
The “effect of the investor’s attention”
Economists also found that the amount of interest and publicity surrounding cryptoactives, which can be measured from the number of related searches that people do online, is also a determining factor in the movement of digital currency prices. .
An analysis of Bitcoin searches on Google shows that “for weekly returns, the Google search proxy significantly predicts 1 and 2 week returns,” according to the report. The observation means that the price of the cryptocurrency goes up in parallel to the Bitcoin searches in Google.
For Ripple, “Google’s search proxy statistically predicts returns a week in advance,” and for Ethereum, “Google’s search proxy statistically predicts returns with one week, three weeks and up to six weeks in advance,” they added.
Google is not the only platform that offers informative data. On Twitter, “an increase of a single standard deviation in the number of Twitter messages with the word Bitcoin” produces a 2.50% increase in Bitcoin’s returns in a week, the study said.