A Statistical Analysis of ICO Performances in Differing Market Conditions
These past several months, an analysis of ICO performances in the midst of varying market volatility was conducted by the data science team at Lunar Digital Assets. Intuition would probably lead a typical retail investor to believe that an ICO will perform better in bull markets as opposed to bear markets (and in stable markets which are void of any particular direction).
A Survey of 288 Crypto Investors
At the inception of the idea for this study, we were curious to see what cryptocurrency traders and ICO investors thought regarding the performances in bull and bear markets. So we asked various networks of traders and investors a fairly simple question.
The results were astoundingly favored towards bull markets, as most would expect. However, it should be pretty noteworthy that 29% of those surveyed disagreed with the majority. (29% because the 12% that voted for “Anytime” would be investing in bull markets as well.)
In hindsight, we probably should have had “I don’t know” added to the list of choices.
When’s the best time to be investing into ICOs? (Survey Results)
- Bull Markets: 171 (59%)
- Neutral Markets: 40 (14%)
- Bear Markets: 35 (12%)
- Anytime, doesn’t matter: 33 (12%)
- Never: 9 (3%)
Note: This was not a scientific survey.
In this analysis, we aim to bring credence to or dispel this commonplace notion using statistical analysis and hypothesis testing. We strongly believe that this study is especially helpful in the relatively young market of cryptocurrencies and initial coin offerings, whereas traditional financial markets have a much longer history and established patterns and trends.
We will attempt to answer the question that everyone thinks they know, but doesn’t really know: Do ICOs really — statistically — perform better in bull markets?
2. Data Scraping, Cleaning & EDA
Data Overview and Exploratory Analysis: Finding reliable data in this fragmented, young market can be challenging.
The data for this study was acquired from Coinist, which provided a sample data size of 457 initial coin offerings. Although we are aware that there were many more ICO’s conducted, we believe that 457 is an ample size to draw inferences from. Coinist was also the only data source that readily had ROI information (the figures were also spot checked for accuracy), and went as far back as 2013 up until the data the captured in May 2018 when this study was being conducted.
As basis of analysis, we will be using each coin’s Return on Investment (ROI) since the ICO Ending date as a measure for investment performance. Due to the varied nature of ROI across ICOs, I will be using a common logarithmic function (Base 10) of each coin’s ROI as reasonable means of comparison. This is especially useful as we are concerned about relative performance in different market conditions and not an associated scalar value.
- Name of Coin
- 1-Hour % Change
- 24-Hour % Change
- Weekly % Change
- ICO Date (last day of token sale)
- ICO Price
- Current Price
- ICO Return on Investment (ROI)
We did not find any major issues with the data other than one mislabeled adte for the coin APX. The ICO date was set to May 21, 1970. While cross referencing with other sources, we had determined and fixed the APX ICO date to May 21, 2017.
Outliers: NXT’s overall ROI of ~24,000% was an obstacle to proper comparison and analysis. Despite being a significant outlier (the next best performer was Ethereum at ~1,900%), we decided to keep this data and regularize it via a common logarithmic function for analysis.
Exploratory Data Analysis
The goal of EDA is to visualize the data in different perspectives to glean additional insights for further analysis, anomaly detection, and data consistency. In this section, we will visualize the data from a high level. First, we wish to explore the pace of ICOs and visualize the rise of ICO as a means of capital funding:
We see a staggering yet unsurprising increase in ICOs in 2017 followed by a decline in 2018 YTD. However, we would not be surprised to see the annual 2018 value exceed 2017’s ending tally. It should be noted that since the data was taken in May, as predicted, the number of ICOs is steadily rising.
More EDA: Visualizing Winners and Losers
Dividing the dataset into losers (where an ICO’s current price is below its ICO price) and winners (where an ICO’s current price is at or above its ICO price, shows that the losers (314) outpace the winners (144) by a ratio of almost 2:1.