Original Research

The crypto market has given big gains and significant losses

Bitcoin seems volatile in the grand scheme of investment opportunities, but as we’ve suggested, it’s remarkably stable day-to-day relative to other cryptocurrencies.

In this research, we looked at all cryptocurrencies (700+ that were actively trading as of September 1, 2016) and indexed their daily price to their average USD price on the first day of trading (but early 2013 for long-standing currencies like Bitcoin and Litecoin). Every coin’s value on the first day is 1; a value of 10 means the price was 10x what it was on the first day. We graphed that, but some coins had incredible multipliers, over 10,000x the opening price, so to display the values, we changed the y-axis to a log. 10¹ = 10x the price, 10² = 100x, etc. Each day has one value.(1)

Bitcoin looks remarkably stable next to the swells of other cryptocurrencies. Many at some point returned 10x their initial value, some 100x, and some over 1000x. GameCredits at one point was trading over 10,000 times its day one price of approximately .000014 USD.

Another disconcerting takeaway: of the over 300,000 “market days” (currency prices x days of trading = days of potential market gain or loss), only 30% involved a price multiple value over 1. That is, overall, only 30% of the time have cryptocurrencies gained value relative to their opening price. If you had bought $1 worth of every cryptocurrency on the first day and tracked each price every day, 70% of the time your individual coins would be below opening price. Of course, some outsized gains can make up for many minor losses, but looking at the graph, most of the data is below the break-even point.

Investors be cautious.

1. Bitcoin’s “first day price” is assumed to be the price on April 28, 2013. We double checked our data against Coinmarketcap to verify historical prices. If Bitcoin’s price is taken as the assumed price when the first Bitcoin transaction was made, the price multiple would be at the top of this chart, but we chose early 2013 as a time when cryptocurrency markets were gaining broader appeal. In this sense, Bitcoin is handicapped, but its “opening price” is low because there was no established market, the number of interested people was small, and of those, many were hobbyists. The broader point about volatility in the market remains.

Leave a Reply

Your email address will not be published. Required fields are marked *