The contentious nature of the ecosystem around cryptocurrencies is partly what gives them value – academics call it “belief heterogenity.”
But discord and personal sentiment alone isn’t enough to keep prices above zero, according to research from Wang Chun Wei, Ph.D., a finance lecturer at the University of Queensland in Australia. According to Wei, if it was easier to bet against cryptocurrency prices through short positions – when someone borrows, then sells an asset with the expectation of buying it back at a lower price in an effort to make a profit on the difference – more of those assets would go to zero.
“Daily volatility of bitcoin is around four percent. This is too high to be simply based on informational changes in fundamental value,” Wei, who previously studied whether Tether’s controversial stablecoin, USDT, could be used to prop up the price of bitcoin, told CoinDesk.