Cryptocurrency Demand Shift

We’ve all heard about a shift in demand.  Not all of us see it in action.  With a dynamic market, we can.  The one for cryptocurrencies fits the bill.

Last August, the top 100 cryptocurrencies had quantities and prices indicated by the white circles in the figure.  Those with a red dot in the center of them formed their red Demand Frontier as of August 1, 2019 (with a P-Value, the chance this equation came about by chance, of 1.28E-04).

Then things changed.

On Friday, March 20, 2020, 94 cryptocurrencies (we lost some), with blue squares for their quantities and prices, reflecting a downward and inward shift in demand.  Each of the Demand Frontier points shifted down (the corralled ordered pairs), except for Tether (which grew slightly) and Ripple (which went down and in).  The result was a shift in the cryptocurrency Demand Frontier to the one in blue, which is steeper (the slope was -1.47, is -1.57) and more highly correlated (R2 was 92.6%, is 96.8%, with P-Value falling to 9.92E-06).  Though the log scaling tends to disguise it, the market lost over 40% of its market capitalization.

What holds up currency prices?  We’ll look at that next time.

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