Shifting Cryptocurrency Influence: A High-Resolution Network Analysis of Market Leaders

ArXiv ID: 2307.16874 “View on arXiv”

Authors: Unknown

Abstract

Over the last decade, the cryptocurrency market has experienced unprecedented growth, emerging as a prominent financial market. As this market rapidly evolves, it necessitates re-evaluating which cryptocurrencies command the market and steer the direction of blockchain technology. We implement a network-based cryptocurrency market analysis to investigate this changing landscape. We use novel hourly-resolution data and Kendall’s Tau correlation to explore the interconnectedness of the cryptocurrency market. We observed critical differences in the hierarchy of cryptocurrencies determined by our method compared to rankings derived from daily data and Pearson’s correlation. This divergence emphasizes the potential information loss stemming from daily data aggregation and highlights the limitations of Pearson’s correlation. Our findings show that in the early stages of this growth, Bitcoin held a leading role. However, during the 2021 bull run, the landscape changed drastically. We see that while Ethereum has emerged as the overall leader, it was FTT and its associated exchange, FTX, that greatly led to the increase at the beginning of the bull run. We also find that highly-influential cryptocurrencies are increasingly gaining a commanding influence over the market as time progresses, despite the growing number of cryptocurrencies making up the market.

Keywords: network analysis, Kendall’s Tau correlation, hourly-resolution data, market interconnectedness, Cryptocurrency

Complexity vs Empirical Score

• Math Complexity: 6.5/10
• Empirical Rigor: 7.0/10
• Quadrant: Holy Grail
• Why: The paper employs advanced statistical methods like Kendall’s Tau correlation and network analysis, indicating substantial mathematical complexity, while its use of novel hourly-resolution cryptocurrency data and comparative analysis demonstrates high empirical rigor and data-heavy implementation.

  flowchart TD
    A["Research Goal<br>Identify market leaders & interconnectedness"] --> B["Data Input<br>Hourly-resolution cryptocurrency prices"]
    B --> C["Methodology<br>Compute Kendall's Tau correlation matrix"]
    C --> D["Computational Process<br>Network analysis & centrality ranking"]
    D --> E["Key Findings"]
    
    E --> F["Bitcoin led early market"]
    E --> G["Ethereum emerged as overall leader"]
    E --> H["FTT/FTX led 2021 bull run start"]
    E --> I["Influence concentrates despite market growth"]