Zoom Technologies ($ZOOM), which has no relation to the popular video conferencing software Zoom ($ZM), recently saw its stock skyrocket in value. Why? It may simply be that investors were confused between the two tickers. Even the Securities and Exchange Commission took notice and suspended trading of $ZOOM in order to protect investors.
We thus became curious about whether crypto investors are also sometimes confused by tokens with similar tickers. Given the large number of tokens already being traded on major exchanges and the speed with which new tokens are listed, this confusion seemed possible.
To look into it, we collected long-term price data on a large set of tokens and compared those with similar tickers. The prices were measured in units of Bitcoin to take out the impact of overall market trends. Then we examined the Pearson correlation between each pair, which ranks correlations on a scale from -1 (perfect negative correlation) to 0 (no correlation) to 1 (perfect positive correlation).
It turns out that, indeed, many similar-sounding token pairs are correlated in price.
The winning pair was Ethereum (ETH) and Ethereum Classic (ETC), which have over 0.5 correlation. This indicates a relatively high degree of correlation. Given that these two are forks of one another and even have similar logos, this is not that surprising.
The runner-up was Zcash (ZEC) and Zcoin (XZC), which have about 0.45 correlation. Both are privacy-centric coins with a letter Z in their logos, so this is also to be expected.
Third place was IOST (IOST) and Miota (MIOTA), which are correlated at roughly 0.4. Internet-of-things applications are their shared focus, and both have black-and-white logos.
Of course, not all tokens with similar tickers are highly or even positively correlated. For example, Bitcoin Diamond (BCD) and Bitcoin Cash (BCH) have only a meager 0.03 correlation.
To be sure, some of these correlations might be due to the fact that certain projects have similar themes, rather than because investors are mistaking one for the other. Correlation, after all, is not the same thing as causation. The correlations here aren’t particularly strong, and they could definitely have other causes.
Still, when starting new crypto projects, founders should really give more thought to the choice of ticker name and logos to avoid confusion with other projects. Most important, investors should look beyond the tickers to make sure that they really know where they are putting their money.