The power of social media to alter cryptocurrency prices is speculated. But… is it true? Over the past 5 years, the value of Bitcoin has skyrocketed (and fallen, and risen again). Cryptocurrency has made its way into all forms of financial transactions. But what turns feeling into action?
Researchers at the Stevens Institute of Technology looked at what drives value up and down. They wanted to see if Bitcoin’s value could be manipulated by public opinion. In other words, are social media posts and bitcoin prices somehow related?
The conclusion? Yes, they are related. But not in the way you think.
Professor Feng Mai demonstrated that positive comments on social media significantly influence the price of Bitcoin. But here is the curveball.
It is the “silent majority” that holds the most influence. It’s those people who don’t talk about Bitcoin all the time that matter. Comments, tweets and posts from people who cannot be silent about Bitcoin have had no influence. Their opinions have not changed the price of Bitcoin even in the slightest degree.
But those infrequent commentators? When they take the time to discuss Bitcoin and its movements, and the outlook for the future, then things happen. They have the power to move prices ten times more than people who can’t keep quiet.
It’s always the silent ones
Mai says we all need to keep an eye out for strong and quiet types.
“They are the ones investors are watching. This was the first robust statistical finding to verify that social media and Bitcoin prices are actually linked. It may be intuitive, but positive sentiment moves Bitcoin prices. Social media voice users can sometimes have a certain agenda, in this case to advertise or raise the price of Bitcoin because they have invested in it themselves. So, while most social messaging around Bitcoin is generated by biased people, sentiment on social media may not accurately reflect the true value of the currency.
Mai says Bitcoin investors recognize these potential conflicts of interest. Thus, positions are easily updated. “The silent majority are the real influencers in driving the value of Bitcoin. Investors seem to understand this.
The silent types of social media? We have you under lock and key. From now on, we keep an eye on you the most discreet.
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