The Impact of Open-Source Community on Cryptocurrency Market Price: An Empirical Investigation

Abstract

The cryptocurrency market has experienced substantial growth in recent years. Though the prices remain volatile, the factors that impact the price dynamics of the new type of investment instrument have not been fully identified yet. In this study, we recognize the dual nature of cryptocurrencies, i.e., being a software program and a financial instrument, and examine the impact of software advancement on the price dynamics of cryptocurrencies. The open-source software (OSS) platform functionality enables social behaviors that we use as signals. Using data from the largest OSS platform, we establish the connection between open-source activities and the price movement of cryptocurrency. In particular, as popularity measures, forks and watches increase the market price increases eventually. On the contrary, contribution measures, such as commits and pull requests, are negatively related to prices. We connect our findings to the public perception of software quality. Our findings have direct implications for investors, OSS platforms, and policymakers.

Keywords: Cryptocurrency, open source, blockchain, signaling theory