Description of work

In this work, we want to analyze the price correlation of ALGO in the last 6 months with several different criteria, including:

• 1 - Price correlation of ALGO with BTC and ETH prices, which are assets with the highest effect on the cryptocurrency market.

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• 2 - Correlation of ALGO price with the number of transactions and ALGO transfers on Algorand.

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• 3 - Analyze the criteria mentioned in the previous sections for another network such as Solana.

1 - Price correlation of ALGO with BTC and ETH

To get the price of these assets:

• For ALGO we use the [algorand.prices_swap] table to calculate the daily price of ALGO in the last 6 months.

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• For BTC we use the [ethereum.core.fact_hourly_token_prices] table to calculate the daily price of WBTC ( Wrapped Bitcoin) in the last 6 months.

  • Note: Wrapped Bitcoin is a tokenized version of Bitcoin (BTC) that runs on the Ethereum (ETH) blockchain.

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• For ETH we use the [ethereum.core.fact_hourly_token_prices] table to calculate the daily price of ETH in the last 6 months.

According to the results:

• The price of ALGO is highly correlated with the price of ETH and BTC.

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• Bitcoin has the highest dominance in the cryptocurrency market (currently 43.50%) so, Bitcoin price changes can easily affect the price of other assets such as ALGO.

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• On January 13 and 14, 2022, the price of ALGO increased sharply, while this increase is not seen in the price of Bitcoin.

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• In early May 2022 (‌ 1 to 8 May) the price of ALGO has risen, while the price of bitcoin was in a sharp downward trend. The reason for this upward move of ALGO was the cooperation of ALGO with FIFA.

2 - Correlation of ALGO price with the number of transactions and ALGO transfers on Algorand.

We use the [algorand.transactions] table to calculate the number of transactions and [algorand.payment_transaction] table to calculate the number of ALGO transfers on ALGORAND.

According to the results:

• The point that can be considered as a correlation of ALGO price with the number of transactions and the number of ALGO transfers is that when the price of ALGO increases or decreases sharply, the number of transactions and the number of ALGO transfers on the network also increases. This is because when the price of an asset decreases, many users sell their asset or swap it to other assets to avoid further losses. As prices increases, more users are starting to buy an asset or swap their assets for it which increases transactions on the network.

3- Price correlation of SOL with BTC and ETH prices, and the number of transactions on SOLANA.

For SOL, we use the [ethereum.core.fact_hourly_token_prices] table to calculate the daily price of Wrapped Solana in the last 6 months and the [solana.core.fact_transactions] table to calculate the number of transactions

According to the results:

• The price of SOL is highly correlated with the price of ETH and BTC.(Just like ALGO)

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• The correlation between the number of transactions and the SOL price is the same as for ALGO.

Conclusion

In this work, we compared the price correlation of two native tokens of Layer-1 blockchains with the price of ETH and BTC, as well as the number of transactions on their network.

• The price chart of these assets has a high correlation with the price of BTC and ETH.

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• Due to the high Bitcoin dominance in the market, price fluctuations of this asset have a great impact on other assets such as ALGO, SOL, and ETH, ie it can be said that the overall market trend is determined by the price of BTC.

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• Pump or dump in price can increase the number of transactions in the network

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• In some places of price charts, it is observed that the price trend of an asset is opposite to the price trend of Bitcoin, which can be due to several reasons:

  • The news about cooperation with other blockchains or large companies.
  • Launch a new application for blockchain, such as launching DEX or NFT marketplace.
  • Heavy purchase of assets by whales.