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Evolutionary dynamics of the cryptocurrency market

Abeer ElBahrawy, Laura Alessandretti, Anne Kandler, Romualdo Pastor-Satorras and Andrea Baronchelli

Papers from arXiv.org

Abstract: The cryptocurrency market surpassed the barrier of \$100 billion market capitalization in June 2017, after months of steady growth. Despite its increasing relevance in the financial world, however, a comprehensive analysis of the whole system is still lacking, as most studies have focused exclusively on the behaviour of one (Bitcoin) or few cryptocurrencies. Here, we consider the history of the entire market and analyse the behaviour of 1,469 cryptocurrencies introduced between April 2013 and June 2017. We reveal that, while new cryptocurrencies appear and disappear continuously and their market capitalization is increasing (super-)exponentially, several statistical properties of the market have been stable for years. These include the number of active cryptocurrencies, the market share distribution and the turnover of cryptocurrencies. Adopting an ecological perspective, we show that the so-called neutral model of evolution is able to reproduce a number of key empirical observations, despite its simplicity and the assumption of no selective advantage of one cryptocurrency over another. Our results shed light on the properties of the cryptocurrency market and establish a first formal link between ecological modelling and the study of this growing system. We anticipate they will spark further research in this direction.

Date: 2017-05, Revised 2017-11
New Economics Papers: this item is included in nep-evo, nep-hme, nep-pay and nep-pke
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Published in Royal Society Open Science 4, 170623 (2017)

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