Year of Graduation
Exploring the Interconnectedness of Cryptocurrencies
Double degree programme in Economics of the NRU HSE and the University of London
This study aims to provide empirical analysis of price pattern similarities between native tokens, which include most popular cryptocurrencies, and non-native distributed ledger tokens created from these cryptocurrency splits or forks. Using a mix of quantitative tools such as PCA and cluster analysis on a representative sample of 30 cryptocurrencies, both original and forked ones, I conclude that there exists market segmentation in cryptoindustry, with degree of segmentation being higher at fork levels compared to that of the native cryptocurrency ones. Further analysis shows that the results regarding the increase in the degree of market segmentation within forks are applicable only for bullish markets, but cannot be applied to the bearish market, therefore, the behavior of cryptocurrencies differs on these two markets. These results are robust to the changes in the target main cryptocurrency, forks of which are taken for the research. Research implies that the cryptocurrencies may be used as instruments with heterogeneous correlations to better diversify and hedge their portfolios. Those, who seeks to invest in diversified range of assets should better use forks rather than main cryptocurrencies, especially at the bullish markets.