A natural assumption to make in the world of cryptocurrencies is that the higher the blockchain activity, the higher the price of the associated token. However, this is a rather basic point of view to take as some recent findings have shown.
Longhash has taken to looking at the information surrounding the top 18 coins by market cap and has come out with some interesting findings on the blockchain activity and its correlation to the price of the token.
By looking at the daily price of each coin, as well as its active address count, Longhash calculated the Pearson Correlation Coefficient – which is essentially looking for the correlation between these two variables.
This led to an interesting graph coming up that shows if there was either a strong correlation between active addresses and price, or a weaker correlation, represented as a lower, or negative number.
It should be noted that this data was taken over a year for all coins by BSV.
The graph shows that coins like Bitcoin, Litecoin, Link, and NEO all show this strong correlation that means their active blockchain links to their price and has a strong correlation between the two.
However, few tokens show no measurable level of correlation between price and active addresses. BSV, XLM, TRON, TEZOS, ETC, MAKER, XEM, and BAT all fall into this category.
Another interesting piece of data to look at is that even though Ethereum is positively correlated, it is still rather weak, but this could also explain why Ethereum is considered the oil that runs dApps on its network.
The data paints an interesting picture, but when it comes to drawing a conclusion, there is probably nothing too solid, but a few noteworthy things to look at.
“While unique active users probably wouldn’t be an effective metric to predict prices for day trading, it looks like over a longer term, some tokens like LTC really have shown a strong correlative connection between their token price and the number of active users transacting on the network in a given day,” Longhash concluded; adding:
“More broadly, though, the data suggests that network activity and token price aren’t always closely related in the short-term. That means that a spike in user activity isn’t necessarily going to lead to a spike in price, particularly if it’s a spike in users of a token like Maker or Tron that has historically shown little correlation between active users and token price.”