A Statistical Classification of Cryptocurrencies

The aim of this paper is to derive the main factors that separate cryptocurrencies from the classical assets, by using various classification techniques applied to the daily time series of log-returns. In this sense, a daily time series of asset returns (either cryptocurrencies or classical assets) can be characterized by a multidimensional vector with statistical components like variance, skewness, kurtosis, tail probability, quantiles, conditional tail expectation or GARCH parameters. By using dimension reduction techniques (Factor Analysis) and classification models (Binary Logistic Regression, Discriminant Analysis, Support Vector Machines, K-means clustering, Variance Components Split methods) for a representative sample of cryptocurrencies, stocks, exchange rates and commodities, we are able to classify cryptocurrencies as a new asset class with unique features in the tails of the log-returns distribution. The main result of our paper is the complete separation of the cryptocurrencies from the other type of assets, by using the Maximum Variance Components Split method. In addition, we observe a synchronicity in the evolution of of the cryptocurrencies, compared to the classical assets, mainly due to the tails behaviour of the log-return distribution.