Testing macroecological theories in cryptocurrency market: neutral models can not describe diversity patterns and their variation

TL;DR

This paper applies ecological theories to analyze cryptocurrency market diversity, revealing that neutral models fail to accurately describe the observed patterns and interactions, especially as the market grows and becomes more interconnected.

Contribution

It introduces an ecological framework to cryptocurrency analysis and demonstrates the limitations of neutral models in capturing market diversity and interactions.

Findings

Cryptocurrency abundance patterns are inconsistent with neutrality.

Market interactions increase with the number of cryptocurrencies.

Presence of mutualistic relations influences market structure.

Abstract

We develop an analysis of the cryptocurrency market borrowing methods and concepts from ecology. This approach makes it possible to identify specific diversity patterns and their variation, in close analogy with ecological systems, and to characterize the cryptocurrency market in an effective way. At the same time, it shows how non-biological systems can have an important role in contrasting different ecological theories and in testing the use of neutral models. The study of the cryptocurrencies abundance distribution and the evolution of the community structure strongly indicates that these statistical patterns are not consistent with neutrality. In particular, the necessity to increase the temporal change in community composition when the number of cryptocurrencies grows, suggests that their interactions are not necessarily weak. The analysis of the intraspecific and interspecific interdependency supports this fact and demonstrates the presence of a market sector influenced by mutualistic relations. These latest findings challenge the hypothesis of weakly interacting symmetric species, the postulate at the heart of neutral models.