EToro, the major multi-asset brokerage, released a crypto market quarterly report for Q3 2020. The report, titled “What Moves the Prices of Cryptoassets,” delves into the main factors that cause cryptocurrencies to rise in value.
The 15 “significant developments” that directly affect the value of a crypto asset include mergers, funding, halving, partnerships, staking and announcements. The researchers analyzed how crypto assets perform after one hour, one day, and one week after the developments occur.
How long do crypto assets rally after announcements?
According to data from eToro and The Tie, crypto assets typically rise the most over a period of a week after any type of announcement is made.
During the first hour after an announcement, cryptoassets tend to increase by around 0.5%. A lackluster market reaction is expected given that it takes time for the information to circulate.
On the first day of an announcement, crypto assets are likely to rise by 0.8% to 1.3%. It is understandable that cryptocurrencies increase more throughout the day than the first hour as news spreads.
Throughout the first week of an announcement, crypto assets often rise by 2% to 8.2%, the most out of all timeframes.
What has the highest chance of leading an upsurge?
At least in the short-term, out of all significant developments, mergers and acquisitions trigger the largest rallies; halving, funding, partnerships, and staking lag behind acquisitions in daily, hourly and weekly performance.
The average price change of crypto assets after a significant development. Source: eToro
The researchers at eToro also found that mergers and acquisitions also lead to a 90% chance of a positive return throughout the week. Notably:
“Mergers and Acquisitions are remarkable, showing a 90% chance of a positive return after a week, averaging 8.23% in returns. This outsized return is likely due to the fact that most token-related M&A news are tightly held secrets. Further, M&A news in the context of tokens are typically done to add further value to an ecosystem.”
The probability of a crypto asset’s price surge after a significant development. Source: eToro
Preventing data leaks
The data points from the eToro Q3 report are likely more useful for institutional investors and professional traders, over retail investors.
But the data provides a unique insight into the type of fundamental factors that influence the price of crypto assets. It also shows that exchanges, projects and other related businesses have to be more cautious in handling potentially sensitive announcements and significant developments.
The report shows that project-related announcements usually have a strong impact on the price of the pertaining crypto assets. As such, it is critical that the related parties or companies ensure that any relevant data does not leak to prevent market manipulation.