Uniswap Labs Blog

New Research on Drivers of Crypto Asset Prices
July 30, 2024

A new paper from a team of researchers at Uniswap Labs, Circle Internet Financial, and the Copenhagen Business School provides insight into how traditional financial factors — like U.S. monetary policy — impact crypto price movements, underscoring that digital assets behave similarly to traditional asset classes in the global financial markets.

At Uniswap Labs, we build products to help bring value onchain. As part of that mission, we’re constantly looking to understand market dynamics, what drives them, and why crypto prices move in the way they do.

The broader crypto market has grown to a market cap of over $2.48T. Despite its growth, crypto markets are generally seen as difficult to understand, predict, and make sense of.

The paper decomposes asset prices into monetary policy, broad market risk premium, and crypto-specific demand since early 2019. Finding, for example, that contractionary monetary policy accounted for more than two-thirds of Bitcoin’s sharp decline in 2022. It also examines event studies like the FTX bankruptcy, the Bitcoin ETF announcements, and COVID-19 financial turmoil.

Bitcoin return by shock since 2019

Bitcoin return by shock since 2019

The research concludes that crypto prices may be more logical than they’ve historically been perceived to be. Read the full paper here.