BroadChain has learned that on August 11, researchers from Uniswap Labs, Copenhagen Business School, and Circle published a paper titled “Research on the Driving Factors of Cryptocurrency Prices.” The article employs a Structural Vector Autoregression model to investigate the factors influencing cryptocurrency returns.
This model uses the co-movement of asset prices to identify the effects of monetary policy and risk sentiment on cryptocurrency prices within conventional markets.
Specifically, the researchers decompose daily Bitcoin returns into three components: conventional risk premium, monetary policy, and cryptocurrency-specific shocks. By leveraging the co-movement of Bitcoin with stablecoin market capitalization, the specific shocks to cryptocurrencies are further decomposed into changes in cryptocurrency risk premium and cryptocurrency adoption levels.
The analysis indicates that cryptocurrency prices are significantly influenced by conventional risk and monetary policy factors. Notably, during the downturn of the cryptocurrency market in 2022, the impact of tightening monetary policy accounted for more than two-thirds of the effects. In contrast, since 2023, the compression of cryptocurrency risk premium has been the primary driver of cryptocurrency returns, independent of the active stock market backdrop.