Understanding Cryptocoins Trends Correlations

TL;DR

This paper investigates the correlation patterns between different cryptocurrencies over two years, revealing strong relationships especially between major coins like Bitcoin and Ethereum, which can aid in forecasting crypto market trends.

Contribution

It provides a comprehensive analysis of crypto-coin price correlations over time, validated with experimental results and publicly released dataset and code.

Findings

Strong correlation patterns between main coins and alt-coins

Correlation trends can support crypto market forecasting

Study covers two years of crypto price data

Abstract

Crypto-coins (also known as cryptocurrencies) are tradable digital assets. Notable examples include Bitcoin, Ether and Litecoin. Ownerships of cryptocoins are registered on distributed ledgers (i.e., blockchains). Secure encryption techniques guarantee the security of the transactions (transfers of coins across owners), registered into the ledger. Cryptocoins are exchanged for specific trading prices. While history has shown the extreme volatility of such trading prices across all different sets of crypto-assets, it remains unclear what and if there are tight relations between the trading prices of different cryptocoins. Major coin exchanges (i.e., Coinbase) provide trend correlation indicators to coin owners, suggesting possible acquisitions or sells. However, these correlations remain largely unvalidated. In this paper, we shed lights on the trend correlations across a large variety of cryptocoins, by investigating their coin-price correlation trends over a period of two years. Our experimental results suggest strong correlation patterns between main coins (Ethereum, Bitcoin) and alt-coins. We believe our study can support forecasting techniques for time-series modeling in the context of crypto-coins. We release our dataset and code to reproduce our analysis to the research community.