The study shows that investor behavior is quite similar in both the stock market and the digital financial market.
Vaasan A recent oven study by the University of Jyväskylä and the University of Jyväskylä shows that speculation and lottery-type behavior are fundamental factors in the pricing of cryptocurrencies.
In its release, the University of Vaasa says that research also shows that investments in cryptocurrencies are associated with significantly increased uncertainty.
For example, the price of Bitcoin, the world’s first cryptocurrency based on blockchain technology, rose last year from US $ 7,200 to as much as US $ 29,374 between January 1, 2020 and January 1, 2021, representing a return of more than 300 percent per year.
Cryptocurrencies the massive rise in prices has taken place at a time when, due to the interest rate pandemic, the uncertainty in traditional foreign exchange markets has increased as large sums of money have been spent by governments in various countries to support their economies.
Postdoctoral researcher at the University of Vaasa Klaus Groby’s and a professor at the University of Jyväskylä Juha Junttila have published a research article Journal of International Financial Markets, Institutions and Money journal, which looks at the appreciation of cryptocurrencies.
Grobys and Junttila study the role of speculative behavior, ie lottery-like behavior in the cryptocurrency market. The study itself carried out an analysis of the so-called MAX effect for 20 different cryptocurrencies, in which the extremely high returns of the previous period describe the possibility of winning, such as the lottery result, also in the near future.
About the study it turns out that investor behavior is quite similar in both the stock market and the digital financial market.
– Previous studies have shown that the return to average of short-term returns and the rate of recovery are also priced in cross-sectional data on cryptocurrencies. Another recent line of research has shown that 50 percent of Bitcoin’s revenue is related to criminal activity. Our research is the first to show that lottery behavior is also an important factor in the pricing of cryptocurrencies, says Klaus Grobys in a University of Vaasa press release.
– Lottery-type behavior may in fact explain some of the rocket appreciation in some segments of the cryptocurrency market, says Juha Junttila in the same release.
According to Junttila, a good example of similar behavior is the Wallstreetbets forum on the social media Reddit site.
Early in the year, “ordinary retail investors” operating at Wallstreetbets began working together to invest in certain downstream companies, such as GameStop. The large number of small investors and the sharp rise in investments meant that the expected result, and thus the ability to distribute profits, lost its role, at least in the short term.
Junttila says in a press release that similar behavior has also been observed in the cryptocurrency foreign exchange market. At the same time, however, he recalls that but the results will require much more review in the near future.
Source site www.is.fi