Limitations of imitation: Lessons from another Bitcoin copycat

Abstract We find strong evidence that imitation to the leader in an uncertain environment provides short-term early success without enhancing long-term survival. Using a unique setting in cryptocurrencies where Bitcoin has been the centre focus, we define copycats as cryptocurrencies that have a name similar to Bitcoin. Our results show copycats earn higher returns in the first day and first week of trading but have a lower survival rate comparing to non-copycats and are robust to alternative definitions of copycat and an instrumental variable. Our results highlight that in an uncertain market created by a novel technology, the name of an organization may be a strong signal to investors when other signals are unclear.