“Perceived value” is key to cryptocurrency prices, study concludes.
A study by Warwick Business School is claiming that the value of cryptocurrency is driven largely by the mood of investors, rather than economic factors. In Cryptocurrencies as an Asset Class? An Empirical Assessment, Daniele Bianchi comes to the conclusion that investor sentiment is what determines a digital currencies’ value.
Rather than this implying that simply people waking up in a bad mood is responsible for a change in Bitcoin’s price, Bianchi’s look into 14 crypto prices reckons that any changes are largely based on “the perceived value of the platforms and projects they are associated with”. What that means is that their values – as with beauty – are largely in the eyes of the beholder, at least at the moment – until the market can be steadied, and proper use cases for cryptocurrency become more commonplace.
Iqbal Gandham, managing director of crypto trading platform eToro, told City AM: “Customer sentiment is really important when it comes to new technologies and cryptocurrencies are no exception.”
“In addition, clarity of regulation which currently is a moving target does affect prices and also sentiment. Personally having a relatively stationary price for a few months is a positive, it gives time for the industry to mature.”