Analysis of the cryptocurrency market applying different prototype-based clustering techniques

Abstract

Since the appearance of Bitcoin, cryptocurrencies have experienced enormousgrowth not only in terms of capitalization but also in number. As a result, thecryptocurrency market can be an attractive arena for investors as it offers manypossibilities, but a difficult one to understand as well. In this work, we aim tosummarize and segment the whole cryptocurrency market in 2018 with the helpof data analysis tools. We will use three different partitional clustering algorithmseach of them using a different representation for cryptocurrencies, namely: yearlymean and standard deviation of the returns, distribution of returns, and timeseries of returns. Since each representation will provide a different andcomplementary perspective of the market, we will also explore the combination ofthe three clustering results to obtain a fine-grained analysis of the main trends ofthe market. Finally, we will analyse the association of the clustering results withother descriptive features of the cryptocurrencies, including the age, technologicalattributes, and financial ratios derived from them. This will help to enhance theprofiling of the clusters with additional insights. As a result, this work offers adescription of the market and a methodology that can be reproduced by investorsthat want to understand the main trends on the market and that look forcryptocurrencies with different financial performance.