Analysis Of The Impact Of Institutional Investors On ERC-20 Tokens' Market Performance

Cryptocurrencies have attracted extensive attention from many institutional investors.In this emerging capital market,what role institutional investors play and what impact they have on the market performance of cryptocurrencies deserve in-depth analysis.Based on the network analysis methods and supervised learning technology,this paper studies the institutional investors and relevant market data of ERC-20 tokens,and then analyzes the impact of institutional investors on ERC-20 tokens' primary and secondary market performance.For the primary market,this paper measures its market performance with successful ICOs(listed for more than one year)and failed ICOs(never listed),and measures the market performance of successful ICOs by the trading volume,the return rate on the first day of listing and the market capitalization on the first week of listing.After determining the circulation scope of the primary market,this paper constructs the circulation graph and tree based on tokens' transfer records.Based on the structural and temporal features of the tree,this paper trains a classifier targeting ICO success/failure.The feature importance ranking of the classifier indicates that funding speed and participant size are important factors affecting the primary market of tokens.Successful ICOs have raised tokens faster and had a larger number of participants.The low correlation between the number of nodes and structural virality indicates that the formation of circulation tree in the primary market mainly depends on the token sales of ”marketing accounts”.Based on the token list of institutional investors,this paper proposes a heuristic method to identify institutions' Ethereum addresses.By analyzing in/out-degree of institutional investors in the graph and the layer number in the tree,this paper finds that the institutional investors is not the main marketing force in the primary market.This paper also finds that the participation of institutional investors is higher in successful ICO tokens,and the market liquidity of the tokens with high participation of institutional investors is also better after they have just been listed.These results suggest that,although institutional investors have no direct influence on the financing of tokens,they may indirectly facilitate the financing of tokens.For the secondary market,this paper measures the market performance of tokens with price,market capitalization,trading volume,liquidity,rate of return and volatility.Then this paper uses the common institutional investors between the tokens as a connection to build a co-investment network,thus embeds the influence of institutional investors on the tokens into the network structure.The strength centrality,closeness centrality,betweenness centrality,and clustering coefficient of nodes are significantly related to secondary market indicators,indicating that institutional investors play a positive role in promoting market liquidity and alleviating market fluctuations.The structural similarity of token nodes measured by the Jaccard indicator,is significantly positively correlated with the similarity in secondary market indicators of them,indicating that the existence of common institutional investors will lead to the convergence of market performance.These results also prove the inefficiency and fragility of the cryptocurrency secondary market.This study proves that institutional investors,as important participants in the primary and secondary market of ERC-20 tokens,will have a non-negligible impact on the market performance.It also reminds individual investors to exercise extreme caution in the highly speculative,inefficient and poorly regulated cryptocurrency market,and not to blindly follow the trend of investing,as institutional investors may deliberately manipulate the market and create bubbles to make profits.