Predicting the Bitcoin & Crypto Returns: New Study Reveals it All

Yale University economic scholars Yukun Liu and Aleh Tsyvinski have recently published a paper discussing the behavior of bitcoin and how the risk-return tradeoff of cryptocurrencies is different from that of other investment instruments and so are the factors affecting them.  
Published by
Predicting the Bitcoin & Crypto Returns: New Study Reveals it All

Yale University economic scholars Yukun Liu and Aleh Tsyvinski have recently published a paper discussing the behavior of bitcoin and how the risk-return tradeoff of cryptocurrencies is different from that of other investment instruments and so are the factors affecting them.

Advertisement

Factors to predict the Cryptocurrency (Bitcoin, Ripple, and Ethereum) returns

In the study, Tsyvinski and Liu found that cryptocurrencies try to establish that the risk-return tradeoff of cryptocurrencies (Bitcoin, Ripple, and Ethereum) is distinct from those of stocks, currencies, and precious metals. The abstract of the paper reads as

“We establish that the risk-return tradeoff of cryptocurrencies (Bitcoin, Ripple, and Ethereum) is distinct from those of stocks, currencies, and precious metals. Cryptocurrencies have no exposure to most common stock market and macroeconomic factors. They also have no exposure to the returns of currencies and commodities.

In contrast, we show that the cryptocurrency returns can be predicted by factors which are specific to cryptocurrency markets. Specifically, we determine that there is a strong time-series momentum effect and that proxies for investor attention strongly forecast cryptocurrency returns. Finally, we create an index of exposures to cryptocurrencies of 354 industries in the US and 137 industries in China.”

While explaining various correlations and divergences, the paper investigates various factors that are specific to the crypto industry. The research considers, Cryptocurrency Momentum, Investor Attention towards cryptos and against cryptos, Crypto Price-to-“Dividend”, Crypto Volatility and Supply Factors. The study considers these factors to be key in determining the momentum, price of a cryptocurrency and the variations of cryptocurrency returns.

also, read: Spoiler Alert: Crypto Veterans Advise Investors to Stop Panicking, Ensure Good Days Ahead

Cryptocurrencies have a potential to affect a number of important industries

While the paper considers only Bitcoin, Ethereum and Ripple for its research, it does significantly conclude that cryptocurrency returns have low exposures to traditional asset classes – stocks, currencies, and commodities. The paper’s findings s cast doubt on popular explanations that the behavior of cryptocurrencies is driven by its functions as a stake in the future of blockchain technology similar to stocks, as a unit of account similar to currencies, or as a store of value similar to precious metal commodities. It also casts light on the fact that the returns of cryptocurrency can be predicted by two factors specific to its markets – momentum and investors’ attention. The findings of this research questions popular explanations that supply factors such as mining costs, price-to-” dividend” ratio, or realized volatility are useful for predicting the behavior of cryptocurrency returns.

The research paper thus concludes that the blockchain technology embodied in cryptocurrencies has a potential to affect a number of important industries. With this conclusion cryptocurrencies especially, Bitcoin, Ethereum and XRP should definitely be a buy in every portfolio.

Does the conclusion of the research paper also come good for other cryptocurrencies as well? Do let us know your view on the same.

Advertisement

Share
Nilesh Maurya

Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on X at @KoinKing1 or connect with me on linkedin.

Published by
Why trust CoinGape: CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journalists and analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.

Recent Posts

  • News

ProShares Files for Index Crypto ETF Tracking Bitcoin, Ethereum, XRP, and Solana

Leading asset manager ProShares is seeking to establish a new crypto ETF tracking the CoinDesk…

October 22, 2025
  • News

Trump Says Meeting with China May Not Happen, Bitcoin Drops

U.S. President Donald Trump has cast doubts over his meeting with China's President Xi Jinping.…

October 21, 2025
  • News

The Great Rotation? Bitcoin Rises as Gold Sees Largest Daily Drop Since 2013

Experts have indicated that a rotation might be occurring with investors moving from gold to…

October 21, 2025
  • News

Crypto Czar David Sacks to Meet Senate Republicans In Bid To Advance Market Structure Bill

Crypto and AI Czar David Sacks is set to meet with Republican members of the…

October 21, 2025
  • News

Waller Floats ‘Payment Account’ Framework to Provide Crypto Firms Access To Fed’s Payment Rails

Federal Reserve Governor Chris Waller has floated the idea of a 'Payment account' framework that…

October 21, 2025
  • Altcoin News

Aster Outpaces Lighter in Perp DEX Rankings as Wintermute Buys the Dip After Previous Dump

Aster is regaining momentum in the perp DEX space as it outpaces Lightchain in 24-hour…

October 21, 2025