Co-Investment Network of ERC-20 Tokens: Network Structure Versus Market Performance

Abstract

Cryptocurrencies have attracted extensive attention from individual and institutional investors in recent years. In this emerging and inefficient capital market, the roles that institutional investors play can have a remarkable impact on the market. This paper investigates the ERC-20 token investment market from a network perspective. Using a dataset containing 317 ERC-20 tokens and their institutional investors at the end of June 2020, we construct a co-investment network of tokens connected by the sharing of institutional investors. Specifically, we examine whether the tokens’ market embeddedness, measured by their network structural properties, can influence their market performance, as well as whether the tokens’ structural similarity in the co-investment network can influence similarity of their market performance. Our results indicate that strength centrality, closeness centrality, betweenness centrality, and clustering coefficient have a significant impact on trading volume and liquidity of the market. And there is a significantly positive correlation between the Jaccard similarity index and tokens’ market performance similarity. This work demonstrates the non-negligible influence of the institutional investors and the diffusion of such influence through co-investment relationships in the cryptocurrency market. We expect the analysis could further enhance the understanding of the inefficiency and vulnerability of this emerging market.

Crypocurrency co-investment network: token returns reflect investment patterns

“…The shape of the distribution has been relatively stable over time, as shown by plotting the distribution for five representative years in the chosen time frame. This observation is also compatible with the findings discussed in [34], where the co-investment network for ERC-20 tokens only exhibits similar structural properties.…”

“…We have also clustered cryptocurrency projects based on metadata and tags from the Coinmarketcap website and studied the community structure. As hinted by previous research and surveys concerning institutional and individual crypto investors preferences [3,4,34,48], our results show that investors tend to specialise and focus on particular technologies, use cases and features of the cryptocurrency projects they decide to include in their portfolio.…”

Blockchain Based Crop Insurance: A Decentralized Insurance System for Modernization of Indian Farmers

“…Nevertheless, by implementing the smart contract, insurers are issued tokens for their commitments (i.e., ERC20 tokens for the Etherium) [4,22,23]. The tokens are issued upon the requirement by the insurers and its value is dependent on market fluctuations [24]. These tokens acts as a standard and the insurers can in this case sell their tokens to other insurers.…”