Analysis and ranking of cryptocurrency for investment multi-criteria decision making method

Abstract

The purpose of this study is to analyze and rank the cryptocurrency using multiple criteria decision-making. Top ten cryptocurrency in 2020 is considered from coinmarketcap.com database. This study reviews the relationship between the criteria and the investors' incentive and classifies the criteria into two groups; positive criteria and negative criteria. The positive criteria consist of return, liquidity, facilitator, length of usage, Sharpe ratio and market capitalization. And the negative criteria consist of volatility and legal. These criteria are employed to analyze and rank the cryptocurrency. The evaluation and ranking method employ the so-called TOPSIS model (Technique for Order Preference by Similarity to Ideal Solution). The weight of criteria is given into three case; 1) weight equally, 2) weight strategy focusing on maximum return and 3) weight strategy focusing on minimum risk. Moreover, this study provides the sensitivity analysis on the cases of weight strategy focusing on maximum return and weight strategy focusing on minimum risk.As the result, coincidentally, the first three and the worse one of ranking are the same results with the different three cases weight. Bitcoin, Tether and Litecoin are the top three best performing, respectively. While the worse one is Binance coin. In conclusion, the risk-neutral investor should prioritize Bitcoin, Tether and Litecoin more than the remaining cryptocurrencies, because these three cryptocurrencies have a best performance for investing in eight dimensions following eight criteria. And, the risk- seeking investor and the risk-averse investor should prioritize Bitcoin, Tether and Lite-coin more than the remaining cryptocurrencies as well as the risk-neutral investor because those three cryptocurrencies also have a best performance for investing in cases of maximum return and minimum risk. For Binance coin, it should be the last choice of all group investors to be selected because the Binance coin have a low performance in all of three cases.