Studies Are Identifying Cryptocurrency Price Movers
What are the findings of researchers on the Bitcoin price moves? Which are the best ETFs?
The Bitcoin Is Now A Prominent Player
For a long time now, Bitcoin has long been prone to violent price swings, leaving investors wondering what has prompted the moves up or down as new research from Yale University has tried to answer that while finding it a lot has to do with momentum and interest on the part of investors.
This is how the Yale economics professor Aleh Tsyvinski, as well as economics Ph.D. candidate Yukun Liu, has pored over price data for Bitcoin, ripple, and Ethereum., which are the three leading digital tokens finding momentum to drive the price of Bitcoin higher.
How Does Momentum Drive Prices
According to Tsyvinski in an interview with CNBC, the price of Bitcoin was increasing by a lot during a week and it's more likely that the price continues to rise in the next week also. It is sure if things go up, they surely continue to go up on average as if things go down, and they continue to go down noting that the same can be true of stocks, bonds, and currencies.
Thereby the researchers concluded that in hindsight it was the best time to buy Bitcoin which would be when the price jumped by a lot and then sell seven days after that. It is here that had investors followed this strategy, as Bitcoin was up 20% they would rather have made an 11% return. Here the momentum strategy has done better with Bitcoin than for XRP, as noted by CNBC.
Here Investor Interest Helps, Hurts Digital Tokens
All these come in addition to the momentum, the researchers found investor attention in cryptocurrencies that have impacted the price movement of the digital tokens. This is why the Yale researchers looked at Google searches for Bitcoin and found that an increase in positive inquiries about Bitcoin made it more likely the price would increase.
Hereby the researchers said that for Bitcoin, the Google searches predict returns one and two weeks ahead as for Ripple, the searches are an indicator for returns one week ahead while Google searches for Ethereum can predict returns for one week, or three weeks and also six weeks ahead.
Thereby it’s not just Google searches that serve an indicator, but CNBC had noted that Twitter can also indicate where cryptocurrency is heading. According to the researchers in a report, there is a one-standard-deviation increase in the Twitter post count for the word Bitcoin yielding a 2.50 percent increase in the 1-week ahead Bitcoin returns. Here the Google searches are negative as the Bitcoin hack for an example results in the reverse predicting a future decline in the price of the digital token.
Which Are The Best Blockchain ETFs For Q3 2020
While it is sure that blockchain exchange-traded funds own stocks in companies that have business operations in blockchain technology or in some way profit from it. Here blockchain is made up of complex blocks of digital information and increasingly used in banking, investing cryptocurrency, and other sectors. So the blockchain which is a relatively new technology there is many of the companies operating in the space that is well established. Here the examples include, International Business Machines Corp. (IBM), Amazon.com Inc. (AMZN), and German-based SAP SE (SAP). Therefore many investors may be wary of risking investment in blockchain due to the technology’s association with the volatile cryptocurrency market. Thereafter blockchain is not the same thing as cryptocurrency and blockchain ETFs investing only in stocks of regulated companies, many of which are blue-chip technology firms.
It is then noticed that the blockchain ETF universe is comprised of about 3 distinct ETFs that exclude inverse and leveraged ETFs as well as funds with less than $30 million in assets under management with the best performing blockchain ETF for Q3 2020 based on the performance over the past year, as the Reality Shares NASDAQ NexGen Economy ETF.
How Is The Reality Shares Nasdaq NexGen Economy ETF (BLCN)
Performance over 1-Year: 11.7%
Expense Ratio: 0.68%
Annual Dividend Yield: 1.47%
3-Month Average Daily Volume: 15,841
Assets Under Management: $55.7 million
Inception Date: January 17, 2018
Issuing Company: Reality Shares
The BLCN comes as a large-cap ETF following a blended strategy, investing in both growth and value stocks as the fund is broadly focused on the technology sector across the developed markets that are worldwide tracking the Reality Shares NASDAQ Blockchain Economy Index, thereby measuring returns of companies involved in the development, research, support, or use of blockchain technology. Here he ETFs top three holdings include Overstock.com Inc. (OSTK), along with e-commerce company that is selling discounted brand-name merchandise; as well as Square Inc. (SQ), a provider of the mobile-payment solutions; and SBI Holdings Inc. (8473), which is a Japan-based financial services company and also a venture-capital fund manager.
What About Amplify Transformational Data Sharing ETF (BLOK)
Performance over 1-Year: 6.3%
Expense Ratio: 0.70%
Annual Dividend Yield: 2.12%
3-Month Average Daily Volume: 34,532
Assets Under Management: $83.2 million
Inception Date: January 17, 2018
Issuing Company: Amplify
Coming as a multi-cap ETF, BLOK follows a blended strategy of investing in a mix of growth and value stocks with the fund broadly focused on companies in the technology sector of developed markets and is more specifically focused on businesses involved in blockchain technology where the ETF’s top three holdings include GMO Internet Inc. (9449), which is a Japan-based company that is offering internet-related services to the corporate clients; Digital Garage Inc. (4819), again a Japan-based web solutions provider and the business incubator; and Intercontinental Exchange Inc. (ICE), that is a company that operates the marketplaces for global commodity and those financial products
There Is This First Trust Indxx Innovative Transaction & Process ETF (LEGR)
Performance over 1-Year: -6.7%
Expense Ratio: 0.65%
Annual Dividend Yield: 2.22%
3-Month Average Daily Volume: 5,895
Assets Under Management: $36.6 million
Inception Date: January 24, 2018
Issuing Company: First Trust
Here LEGR is a large-cap ETF following a blended strategy with the fund broadly focused on the technology sector across developed markets and tracks the Indxx Blockchain Index, where the ETF’s top three holdings include NVIDIA Corp. (NVDA), which is a semiconductor company; PayPal Holdings Inc. (PYPL), coming as an online payment-solutions provider; and Advanced Micro Devices Inc. (AMD), which is a semiconductor company.
This information help us conclude that the market is ripe with cryptocurrencies yielding much greater shares as the market firsts.