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A cryptocurrency is a digital asset maintained by a decentralised systemusing cryptography. Investors in this emerging digital market are exploring theprofitability potential of portfolios in place of single coins. Portfolios areparticularly useful given that price forecasting in such a volatile market ischallenging. The crypto market is a self-organised complex system where thecomplex inter-dependencies between the cryptocurrencies may be exploited tounderstand the market dynamics and build efficient portfolios. In this letter,we use network methods to identify highly decorrelated cryptocurrencies tocreate diversified portfolios using the Markowitz Portfolio Theory agnostic tofuture market behaviour. The performance of our network-based portfolios isoptimal with 46 coins and superior to benchmarks up to an investment horizon of14 days, reaching up to 1,066% average expected return within 1 day, withreasonable associated risks. We also show that popular cryptocurrencies aretypically not included in the optimal portfolios. Past price correlationsreduce risk and may improve the performance of crypto portfolios in comparisonto methodologies based exclusively on price auto-correlations. Short-termcrypto investments may be competitive to traditional high-risk investments suchas the stock market or commodity market but call for caution given the highvariability of prices.

A network-based strategy of price correlations for optimal cryptocurrency portfolios