The first complete study of the entire cryptocurrency market between 2013 and 2017 has concluded that no cryptocurrency has shown a strong selective advantage over the other and that all cryptocurrencies face an uncertain fate.

Led by City, University of London’s Dr Andrea Baronchelli, along with postdoctoral student Laura Alessandretti and doctoral student Abeer ElBahrawy, the study, published in the Royal Society’s Open Science journal, found that investors in cryptocurrencies appeared to allocate their money without considering factors such as the price of a cryptocurrency or the properties of its underlying technology.

By treating cryptocurrencies as ecological species, the authors demonstrate that a simple evolutionary model reproduces several key empirical findings such as the distribution of the cryptocurrencies market capitalisation or the turnover rate in the top rank positions.

Dr Andrea Baronchelli

The results, published in their paper titled ‘Evolutionary dynamics of the cryptocurrency market’, suggest that the evolution of the cryptocurrency market has so far been ruled by “neutral” forces, where no cryptocurrency has shown any strong selective advantage over the other.

Dr Baronchelli, a Lecturer in the Department of Mathematics, co-authored the study with academics from the Max Planck Institute for Evolutionary Anthropology in Germany and Polytechnic University of Catalonia in Spain. He said: “Bitcoin has been steadily losing ground to the advantage of the immediate runners-up and users do not seem to have paid much attention to technological advancements, so far. Rather, our findings are compatible with a scenario in which investors choose which cryptocurrencies to invest in, proportionate to those cryptocurrencies’ market share and nothing else.

"Bitcoin is not alone or invincible and we believe that our work represents a first step towards a better understanding and modelling of the cryptocurrency market"

Dr Baronchelli