Nizhny Novgorod scientists explained …


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Nizhny Novgorod scientists explained ...

Nizhny Novgorod scientists explained the lack of a rally in the cryptocurrency market

  • Lobachevsky University in Nizhny Novgorod believes that the rally in 2017-2018 is behind the “herd instinct”

  • Small traders used to succumb to false signals from larger traders

  • The maturity of the cryptocurrency community may be one of the reasons for the lack of a repeat rally

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Lobachevsky University in Nizhny Novgorod also came to the conclusion that the cryptocurrency market is filled with excessive news reflection

Nizhny Novgorod scientists explained ...

Scientists from Nizhny Novgorod Lobachevsky University (UNN) came to the conclusion that the cryptocurrency market, like the traditional financial market, is characterized by periods of “herd instinct” during a sharp rise and fall, which forms the price rally.

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According to the study, participants in the cryptocurrency market, against the background of the bullish trend of 2017-2018, ignored the negative news, not calculating the potential risks of losses.

At that time, there was an effect of inverse asymmetry (uneven distribution of information between the parties) of the market reaction, says Marina Malkina, professor of the Department of Economic Theory and Methodology of the Institute of Economics and Entrepreneurship of Lobachevsky University.

“With a bearish trend and a declining market, investors became hypersensitive to bad news. However, if the market began to move intensively, in principle, the asymmetry of the reaction to good and bad news was practically not observed, ”she said..


Also, the UNN came to the conclusion that if until January 2017 small traders were mostly guided by their own strategies, then as the cryptocurrency rally approached, they copied the trading strategies of larger players, assuming they had insider information.

Nizhny Novgorod scientists explained ...

The study also observed small traders who, over time, no longer succumbed to provocations from large traders..

“… and this is precisely what prevented the small market rally of 2019 from surpassing its analogue of the 2017 sample, both in terms of the amplitude of fluctuations and in terms of duration,” the study concluded..

The UNN also concluded that the frequently changing reaction of the digital asset market to news, as well as the expressed “herd instinct” of participants, demonstrate “the inefficiency of the cryptocurrency market”.

Imaginary bubble

However, despite all its “inefficiency”, the cryptocurrency market continues to grow exponentially.

Since March 2020 alone, the market capitalization of the largest stablecoin Tether (USDT) has increased by 140% to $ 12 billion.

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This time, the excitement may be related to the decentralized finance market (DeFiDecentralized finance (DeFi) is a financial services built on the basis of blockchain technology that offer users access to an open, efficient and … More), the tokens of which, although they have increased risks, but also surpass many other altcoins in profitability.

Analysts of the resource DappRadar, although they announced a possible domino effect that could bring down the DeFi market, do not believe that capital inflows are behind the growth..

The increase in the total value of assets locked in various DeFi applications was 75% due to the rise in token prices, according to DappRadar.

Nizhny Novgorod scientists explained ...

“Meanwhile, the inflow of new money into the industry accounted for only 25% of recent growth,” analysts said..

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