  Since its conception, the cryptocurrency market has been frequently described
as an immature market, characterized by significant swings in volatility and
occasionally described as lacking rhyme or reason. There has been great
speculation as to what role it plays in a diversified portfolio. For instance,
is cryptocurrency exposure an inflationary hedge or a speculative investment
that follows broad market sentiment with amplified beta? We have recently
explored similar questions with a clear focus on the equity market. There, our
research revealed several noteworthy dynamics such as: an increase in the
market's collective strength and uniformity during crises, greater
diversification benefits across equity sectors (rather than within them), and
the existence of a "best value" portfolio of equities. In essence, we can now
contrast any potential signatures of maturity we identify in the cryptocurrency
market and contrast these with the substantially larger, older and better
established equity market. This paper aims to investigate whether the
cryptocurrency market has recently exhibited similar mathematical properties as
the equity market. Instead of relying on traditional portfolio theory, which is
grounded in the financial dynamics of equity securities, we adjust our
experimental focus to capture the presumed behavioral purchasing patterns of
retail cryptocurrency investors. Our focus is on collective dynamics and
portfolio diversification in the cryptocurrency market, and examining whether
previously established results in the equity market hold in the cryptocurrency
market, and to what extent. Results reveal nuanced signatures of maturity
related to the equity market, including the fact that correlations collectively
spike around exchange collapses, and identify an ideal portfolio size and
spread across different groups of cryptocurrencies.
