The influence of social networks on the prices of cryptocurrencies is well established. But… how far can this influence go? Over the past 5 years, the price of Bitcoin has risen (and fallen, then skyrocketed). Satoshi Nakamoto’s cryptocurrency has become part of all types of financial transactions. But what turns feeling into action?
Researchers at the Stevens Institute of Technology have investigated what drives prices up and down. They wanted to determine if Bitcoin’s price could be manipulated by market sentiment. In other words, are social media posts and the price of Bitcoin somehow related?
The conclusion ? Yes, they are related. But not in the way you would have thought.
Indeed, Professor Feng Mai demonstrated that positive comments on social media significantly influence the price of Bitcoin. That said, not all comments have the same effect.
It is the “silent majority” that has the most influence. These are the people who don’t spend their days talking about Bitcoin. Comments, tweets and posts from people who talk too often about Bitcoin have had no influence. Their opinions did not change the price of Bitcoin even by one Satoshi.
What about people who talk about it once a month? When they take the time to discuss Bitcoin, its movements and its future prospects, their words have an effect. Indeed, they have the power to move prices ten times more than people who constantly speculate on the asset.
It is always those who talk the least who influence the price of Bitcoin
Mr Mai thinks we all need to keep an eye out for those who talk the least but have things to say.
“They are the ones investors listen to. This is the first statistical finding that truly illustrates the relationship between social media and the price of Bitcoin. It may be intuitive, but positive sentiment moves the price of Bitcoin. Highly active social media users can sometimes have a certain personal agenda, and hype or boost the price of Bitcoin because they have invested in it themselves. So while most social posts about bitcoin are posted by people with biased opinions, sentiment on social media may not accurately reflect the true value of the currency.”
Furthermore, Mr. Mai pointed out that Bitcoin investors recognize these potential conflicts of interest. Thus, the messages are easily ignored. “The silent majority are the real influencers who determine the value of Bitcoin. Investors seem to understand that.”
Are you one of those silent people on social media? From now on, we will follow all your publications.
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