Assessing Holistic Impacts of Major Events on the Bitcoin Blockchain Network

TL;DR

This paper introduces a framework with an Impact-Score metric to analyze how major global events influence Bitcoin's network activity, revealing significant correlations and consistent impacts across different event types and network facets.

Contribution

The paper presents a novel holistic analysis framework and Impact-Score metric for quantifying the effects of major events on Bitcoin's network dynamics.

Findings

Most major events are correlated with significant network changes.

Financial events show strong correlations with specific blockchain sub-structures.

Network spikes often align with major worldwide events.

Abstract

As the pioneer of blockchain technology, Bitcoin is the most popular cryptocurrency to date. Given its dramatic price spikes (and crashes) along with the never-ending news from SEC regulations to security breaches, there seems to be a lack of understanding about the dynamics of cryptocurrencies. These dynamics are believed to be affected by various political, security, financial, and regulatory events. In this paper, we present an efficient framework for holistic analysis of cryptocurrency fluctuations by introducing the Impact-Score metric to distinguish event-induced changes from normal variations. We have applied our framework to 16 major worldwide events and the Bitcoin blockchain network (defined as Bitcoin transaction and users, blockchain data, and memory pool data) from 2016-2018. The results show that a majority of the events are correlated with substantial network changes. We observed roughly generalizable correlations between event types (e.g. financial events) and sub-structures of the Bitcoin blockchain network. Subgroups of these events have strongly consistent temporal impacts on specific facets (e.g. activity or fees) of the Bitcoin ecosystem. Furthermore, we demonstrate the robustness of our process by correlating a majority of spikes in network/subnetwork change with major events.