Crypto Connections: How Digital Currencies Move Together
Cryptocurrencies don't operate in isolation. They are part of a complex web where their prices influence each other. This idea was tested using special tools called correlation networks. These networks help spot patterns that stay consistent over time and shape how prices change.
Data Sets and Findings
To make the findings strong, two sets of data were used:
- First Set: Included 14 cryptocurrencies starting from November 2017.
- Second Set: A smaller group of 9 cryptocurrencies beginning in September 2016.
Both sets ended in March 2018. The smaller group had more data points, making it easier to track changes over time.
Key Discoveries
When USD Tether was left out, the results showed a clear link between different cryptocurrencies. Some pairs, like Bitcoin and Bitcoin Cash, didn't show a strong connection, even though one was a fork of the other. This was surprising because forks usually move together.
The study also found two distinct groups:
- Group 1: Closely tied to Cardano.
- Group 2: Linked to Ethereum.
This suggests that these two cryptocurrencies have a significant impact on others.
Beyond Speculation
Interestingly, the data didn't support the idea that a token's function or how it was created is the main factor in price changes. Instead, it hinted that other factors, beyond just speculation, play a role in shaping prices.
