Token price is not necessarily controlled by blockchain activity

Although trading activity is essential for a crypto asset, it does not necessarily dictate the token price.

Is the token price unaffected by trading activity?

If the token price was dictated by their network activity, the most active asset should have been the one with the highest value. However, it is not the case, as different crypto assets have different degrees of correlation with their blockchain activity. Looking at the top 18 assets, excluding stablecoins, we can see that few have a correlation of over 50 percent.

Taking the data from Coin Metrics’ platform for the asset price as well as the active address count, we can compare the data. This would count the number of addresses that have conducted at least one trade on the network in the day.

This way, we can compare the change in price against the active addresses on the day. As different tokens started at different times, the data regarding them is different; however, it consists of one year of data for all assets except BSV.

The data were compared between 1 and -1, with the former representing perfect positive correlation, while the other indicates a perfect negative relationship. Negative correlation would mean when one value goes up; the other goes down and vice versa for positive correlation.

Networks such as Bitcoin, Litecoin (LTC), LINK, and NEO showed a high level of correlation, suggesting that high trading activity creates a bullish effect. On the other hand, Bitcoin Satoshi Vision (BSV), Tron, XLM, and XEM and MAKER, showed little to no correlation. The data suggested that the token price on these networks was not dictated by trader activity.

Ethereum (ETH) was also close to falling in the category. This is mainly due to the fact that the network earns a lot of fees for supporting the dApps that operate on the network.