Predictive Strength
unravel
unravel
unravel
Predictive Strength
Measures the assets' overall share of all conversations about crypto.
Investor attention demonstrably precedes Bitcoin returns and volatility, acting as a predictive factor. Studies show attention metrics (Google Trends, social volume) Granger-cause price movements, with predictive accuracy improvements of 20% over baseline models in out-of-sample tests. This aligns with behavioral finance principles where attention drives retail investor inflows before institutional actors react.
For smaller-cap assets, attention directly impacts liquidity. A 10% increase in conversation share reduces idiosyncratic risk by improving market depth and narrowing bid-ask spreads. This creates a self-reinforcing cycle: rising attention → improved liquidity → reduced volatility → sustained attention.
The Attention Index sources data from social media platforms, forums, and crypto-related websites to track conversation volumes about specific assets. These inputs are aggregated and normalized against historical averages to determine relative attention levels, with maximum score of 1 indicating heightened interest compared to past trends.
To understand a predictive factors predictive power, we create a simple long/short strategy and simulate its past performance (with daily rebalancing):
The strategy is rebalanced daily, on a continuous basis. There are 0.5% transaction costs applied on each position adjustment.
unravel
Predictive Strength
Predictive Strength
Predictive Strength
Predictive Strength