[LongHash Column] Confused? Do the prices of tokens with similar abbreviations have any correlation?

This article is reproduced with permission from LongHash, originally titled "Is There a Correlation Between Tokens with Similar Codes?"

Recently, the stock price of Zoom Technologies (stock symbol: ZOOM) surged. Why? It may simply be because investors confused it with the popular video conferencing software Zoom (stock symbol: ZM), even though they are not related at all. Even the Securities and Exchange Commission has taken notice of this and suspended trading of ZOOM Technologies to protect investors.

This makes us wonder if sometimes, cryptocurrency investors might confuse tokens with similar codes. Given the large number of tokens trading on major exchanges and the speed at which new tokens are listed, such confusion seems possible.

To delve deeper, we collected long-term price data for a large group of tokens and compared the prices of tokens with similar codes. We observed the impact on overall market trends using Bitcoin as the price benchmark. Next, we looked at the Pearson correlation coefficient for each token pair, with values ranging from -1 (absolute negative correlation) to 1 (absolute positive correlation).

It turns out that many tokens with similar-sounding codes do indeed exhibit price correlations. The token pair with the highest correlation is ETH and ETC, with a correlation exceeding 0.5. This value reflects a moderate correlation. Given that one is a fork of the other and they have similar logos, this is not particularly surprising.

Following closely are Zcash (ZEC) and Zcoin (XZC) with a correlation coefficient of 0.45. Both are privacy-focused tokens with logos featuring the letter Z, so this correlation is also expected.

In third place are IOST (IOST) and Miota (MIOTA) with a correlation coefficient of approximately 0.4. They share a focus on Internet of Things applications, and both logos are black and white.

Of course, not all tokens with similar codes exhibit high correlation, and they may not even have positive correlation. For example, the correlation coefficient between BCD and BCH is only 0.03.

However, in some cases, it may be due to the similarity in themes of certain projects rather than investors confusing the two. After all, correlation does not imply causation. In this case, the correlation is not particularly strong, so there could be other reasons.

Nevertheless, when creating new cryptocurrency projects, founders should indeed carefully consider code names and logos to avoid confusion with other projects. More importantly, investors should look beyond the codes and ensure they truly understand where they are putting their money.

This article is from our partner LONGHASH

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