Cryptocurrency Survival Analysis

Abstract

Cryptocurrencies are one of the greatest technological innovations. Cryptocurrencies are decentralized payment systems in which ownership is demonstrated cryptographically. An overview of ownership of payment units is stored in a data structure called blockchain. Of the thousands of cryptocurrencies, the best known are Bitcoin, Ethereum, Ripple, Litecoin, EOS, Cardano, NEO, Dash, and Monero. In the past, new cryptocurrencies were most often created by modifying the parameters of another cryptocurrency and by launching a own blockchain. Nowadays, new cryptocurrencies are most commonly created as applications on another existing cryptocurrency. Such cryptocurrencies are called tokens. Creating a new cryptocurrency is easy, but its value depends on users’ willingness to pay for its units. If a cryptocurrency loses its users, it becomes worthless. In this article, we analyze over 2,500 cryptocurrencies that are or were previously traded on cryptocurrency exchanges. We have explored the probability that a cryptocurrency will not survive and will be delisted from exchanges. For the different categories of cryptocurrencies according to their previous trading time on exchanges, we have determined the conditional probability of delisting within 1 to 5 years. We found out that the new cryptocurrencies are the riskiest. With the increasing age of the cryptocurrency, the probability of its delisting decreases.

TOPIC: Currency

Key Findings

• • Cryptocurrencies constitute an expanding area for potential participation and investment. Since the first cryptocurrency was created in 2009 (Bitcoin) more than 2,500 cryptocurrencies have been listed on exchanges.

• • Consider waiting at least a year before buying a new cryptocurrency. More than 70% of cryptocurrencies that become delisted do so in the first year.

• • Consider waiting five years before buying a new cryptocurrency. Cryptocurrencies that have been trading for five years have a 9% chance of being de-listed within one year.