This research papers shows that the behaviour of cryptocurrencies like Bitcoin has interesting similarities to stock and precious metal markets, such as gold and silver. The authors report that whilst Litecoin closely follows Bitcoin’s behaviour, it does not show all the reported properties of Bitcoin. Agreements between apparently disparate complexity measures have been found, and it is shown that statistical, information-theoretic, algorithmic and fractal measures have different but interesting capabilities of clustering families of markets by type.

This report is particularly interesting because of the range and novel use of some measures of complexity to characterise price behaviour, because of the IRS designation of Bitcoin as an investment property and not a currency, and the because of the announcement of the Canadian government’s own electronic currency MintChip.

Download this report to discover the clear distinction between the complexity and fractal roughness between the three families of markets studied herein; stock, foreign exchange and precious metals. The authors highlight that Bitcoin displays one of the most complex and roughest behaviour of cryptocurrencies across all markets, whilst Litecoin is sometimes closer to currencies but moving in the direction of Bitcoin. This is most likely due to its low volume, as it has a clear trend towards the position of Bitcoin over a period of fast transaction volume increase.

Indeed, smaller cryptocurrencies seem too weak to carry signals to show the behaviour displayed by Bitcoin, even though they clearly follow Bitcoin’s trends. To the authors knowledge this is the first
time that complexity measures of different nature – namely information theoretic, algorithmic complexity, fractal and statistical – converge at clustering the behaviour of complex systems such as markets, and
have been applied to quantifying common similarities and dissimilarities among them.