An Analysis of Ethereum & Bitcoin Markets

Image source: http://cryptopost.com/wp-content/uploads/2017/10/ethereum-bitcoin-1.jpg

What are Bitcoin and Ethereum

Bitcoin and Ethereum are the top 2 cryptocurrencies in terms of market capitalization.

My exposure to Cryptocurrencies

1st August 2016, I joined Shift Payments as a Software Engineer Intern. It is a Fintech startup located in San Francisco. The product of the company is a VISA debit card which allows the cardholders to spend their Cryptocurrencies from their Coinbase wallets directly.

Even though I worked with Shift’s transactions data every day, it never occurs to me that I should buy Cryptocurrencies. (At that time, 1 Bitcoin = $500–600 USD)

The main reasons are:

  1. They are risky as the government might implement policies to ban them. This is possible considering that the US has very strict financial regulations
  2. Cryptocurrencies are too “technical” for the general public. They are unlikely to go mainstream
  3. Judging from the historical prices, it is not obvious to me (at that time) that the prices will skyrocket

I never expect Cryptocurrenies prices to surge so much. The following meme shows what I think of every time the price skyrocketed.

Images from the movies: Back to the Future & The Wolf of Wall Street.

Objective: To see if there is any market pattern based on the prices

I will be using the historical prices of Bitcoin and Ethereum to conduct my analysis. I am interested to discover the pattern for the prices.


Bitcoin — Tables and charts

First, let’s get the overview for Bitcoin prices from 2013–05–01 to 2017–12–31.

http://www.shawn-ng.com/cryptocurrency#t1

Below shows an image of the visual exploratory data analysis (vEDA) of the Bitcoin prices.

This image is a screenshot from my Jupyter notebook.

From the Bitcoin price table, I noticed that the closing price difference (Close Diff %) doesn’t decrease when the market cap difference (MarketCap Diff %) decrease. This is strange because I thought that when the market cap drops, the closing price should drop. So, I want to find out if there is any correlation between these 2 columns.

This image is a screenshot from my Jupyter notebook.

From the scatterplot, there seems to be no clear linear relationship. So, I believe there is no strong correlation. Sure enough, the correlation between them is 0.0132046568238.


Ethereum — Tables and charts

Second, let’s take a look at the overview for Ethereum prices from 2015–08–08 to 2017–12–31.

http://www.shawn-ng.com/cryptocurrency#t2

vEDA

This image is a screenshot from my Jupyter notebook.

Scatterplot, correlation = 0.0956120300681, while the correlation is higher than that of Bitcoin, it is still not significant.

This image is a screenshot from my Jupyter notebook.

Comparison between Bitcoin and Ethereum

Even though the close diff (%) column tells us the change in closing price every day, it is still hard to picture the overview of the price changes. So I decided to build interactive calendar heatmaps.

http://www.shawn-ng.com/cryptocurrency#m1

Days where Bitcoin prices jump by at least 15%:

[‘2013–05–04’, ‘2013–11–18’, ‘2013–11–21’, ‘2013–11–26’, ‘2013–12–19’, ‘2014–03–03’, ‘2014–04–11’, ‘2014–11–12’, ‘2015–01–15’, ‘2017–07–17’, ‘2017–07–20’, ‘2017–09–15’, ‘2017–12–06’, ‘2017–12–07’]

Days where Bitcoin prices drop by at least 15%:

['2013-07-05', '2013-11-19', '2013-12-01', '2013-12-06', '2013-12-07', '2013-12-16', '2013-12-18', '2014-01-07', '2014-03-27', '2014-04-10', '2015-01-13', '2015-01-14', '2015-08-18', '2016-01-15', '2017-09-14']
http://www.shawn-ng.com/cryptocurrency#m2

Days where Ethereum prices jump by at least 15%:

['2015-08-11', '2015-08-13', '2015-08-19', '2015-08-20', '2015-10-22', '2015-10-26', '2015-10-27', '2015-10-29', '2015-11-01', '2016-01-23', '2016-01-25', '2016-02-07', '2016-02-09', '2016-02-11', '2016-02-18', '2016-02-22', '2016-03-01', '2016-03-09', '2016-03-12', '2016-04-30', '2016-07-22', '2016-08-03', '2016-12-06', '2017-01-03', '2017-01-04', '2017-02-14', '2017-03-13', '2017-03-15', '2017-03-16', '2017-03-19', '2017-03-24', '2017-04-27', '2017-04-30', '2017-05-04', '2017-05-19', '2017-05-21', '2017-05-30', '2017-06-10', '2017-06-12', '2017-07-12', '2017-07-17', '2017-07-18', '2017-09-15', '2017-09-18', '2017-11-24', '2017-12-11', '2017-12-12']

Days where Ethereum prices drop by at least 15%:

['2015-08-17', '2015-09-11', '2015-09-28', '2015-11-11', '2016-02-16', '2016-03-07', '2016-06-17', '2016-06-18', '2016-08-02', '2017-03-18', '2017-09-04', '2017-09-14', '2017-12-22']

It is interesting to see that even though Ethereum is created after Bitcoin, Ethereum has more days where the prices jump by at least 15%. You can do some research on the dates or 1 day before each dates to see if there are any news that might potentially explain the price surge/plunge.

Comparing growth rate of Bitcoin & Ethereum

This image is a screenshot from my Jupyter notebook.

In order to compare the rate of growth of Bitcoin and Ethereum, I take both data starting from 2015–08–08 to 2017–12–31 and normalized them. By 2017–12–31, Ethereum grows by 1004.519962 times while Bitcoin grows by 54.239080 times since 2015–08–08.

This confirms the assumption made from the heatmaps: Between 2015–08–08 to 2017–12–31, Ethereum’s growth is 18.5 times of Bitcoin’s growth.

http://www.shawn-ng.com/cryptocurrency#t3

Summary

Here are some observations I derived:

  1. Even though the market cap drops, it doesn’t mean that the prices of the Cryptocurrencies will drop as well
  2. Ethereum has a higher growth than Bitcoin
  3. From time series analysis, there is no seasonality or cycle. However, it is clear that there is a strong increasing trend

Disclaimer: This is not investment advice, merely my opinion on the cryptocurrencies. Do your own research.

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