Are cryptocurrency price changes predictable

Abstract

The purpose of this research is to identify how effective the determinants of the price changes in cryptocurrencies are and if they are predictable. The study addresses several independent variables that are in our consideration which may impact the prices the most. To obtain the results, panel data has been used to run fixed effects models. Then I treated them as time series data to run dynamic, distributed lags, and first-differencing regression models. Important political shocks and instabilities have been analyzed and interpreted in this paper. In the light of our findings we were able to comment on the complex relation between cryptocurrency prices and socio-political situations throughout the time range. The results address that cryptocurrency price changes are not predictable. It is hard to say what does affect the most prices. Internet search trends seem to have an impact but at the end it has been found that the correlation is not strong. From an economist's viewpoint, investing in cryptocurrencies without analyzing price changes and news might be disastrous and we can call it basically gambling. Cryptocurrencies shouldn't be seen as a gambling medium and should be taken more seriously like an investment medium. In some specific occasions investing in cryptocurrencies may lead lucrative income.