Experimental Evidence of Peer Influence in Cryptocurrency Trading

Summary

This study experimentally examines whether visible trading behavior can influence subsequent activity in cryptocurrency markets. Researchers deployed bots to place low-cost trades across 217 cryptocurrencies over six months, conducting more than one hundred thousand trades. They report that individual buy actions were followed by short-term increases in buy-side activity that were hundreds of times larger than the interventions themselves.

The findings suggest that peer effects may shape trading activity and that exchange design choices can affect these dynamics. The experiment offers evidence about behavioral responses in the particular markets and platform studied, rather than a general estimate for all cryptocurrency venues. The text does not explain how the increase was measured, how other causes were ruled out, or whether the observed activity translated into price changes or trading profits. Its main contribution is evidence of possible social influence in market behavior, alongside a reminder that platform interfaces and rules may matter.

Key ideas

• The experiment tests whether traders respond to other participants’ trading actions.
• Bots placed low-cost trades in 217 cryptocurrencies over six months.
• The authors report substantially greater short-term buy activity following individual buy actions.
• The findings concern peer influence on one studied exchange and do not establish profitable signals.
• Exchange design may shape social and economic behavior in digital markets.

Tags

# An Experimental Study of Cryptocurrency Market Dynamics


# An Experimental Study of Cryptocurrency Market Dynamics









As cryptocurrencies gain popularity and credibility, marketplaces for cryptocurrencies are growing in importance. Understanding the dynamics of these markets can help to assess how viable the cryptocurrnency ecosystem is and how design choices affect market behavior. One existential threat to cryptocurrencies is dramatic fluctuations in traders' willingness to buy or sell. Using a novel experimental methodology, we conducted an online experiment to study how susceptible traders in these markets are to peer influence from trading behavior. We created bots that executed over one hundred thousand trades costing less than a penny each in 217 cryptocurrencies over the course of six months. We find that individual "buy" actions led to short-term increases in subsequent buy-side activity hundreds of times the size of our interventions. From a design perspective, we note that the design choices of the exchange we study may have promoted this and other peer influence effects, which highlights the potential social and economic impact of HCI in the design of digital institutions.

Shown in full with attribution under the source's licence. Licence: abstract CC0

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.