Cryptocurrency price and network activity are not always related

A study of the analytical portal LongHash showed that the price of cryptocurrency is not always associated with high network activity.

A recent analysis found various types of correlations between the price of cryptocurrency and network bandwidth, as well as its actual use. According to the researchers, there is no clear and direct relationship between the number of transactions and the market price of a coin or token.

“In the long run, some cryptocurrencies, such as LTC, sometimes do show a strong correlation between the price of a coin and the number of active users who perform operations on the network on a particular day,” concluded researchers at LongHash.

LongHash processed
CoinMetrics data for the top 18 cryptocurrencies by market capitalization. Research correlates market price with active addresses. Data was taken for at least a year, with the exception of Bitcoin SV (BSV), as well as information for a longer period of time for cryptocurrencies with a longer history.

Depending on the cryptocurrency, the correlation index (Pearson’s correlation coefficient) moved between 1 and -1. This means that for some cryptocurrencies, the correlation was strong, while for others, the price and network activity were practically not interconnected.

Cryptocurrencies such as BTC, LTC, LINK and NEO show a strong correlation of the dependence of the price on network activity – an increased network activity is usually followed by an increase in the cost of the crypto asset. For other cryptocurrencies, for example, BSV, XLM, TRX, XTZ, ETC, MKR, XEM and BAT, the correlation turned out to be very weak – an increase in network activity did not affect the increase in the price of the crypto asset.

At the same time, ETH, which also showed a weak correlation, was identified by researchers as a separate class of crypto assets. The reason for this is that ETH is also used as a tool for running various applications, and increasing the level of transactions on the network does not always mean increased speculative interest.

In July, LongHash researchers found that the highest volatility in cryptocurrency markets occurred at 4 a.m. Moscow time. In addition, in October, portal analysts said the short-term era of ICO is approaching its logical end, and also conducted an analysis
700 “dead” cryptocurrency projects to identify the reasons for the loss of their activity.