A study to find out the social media's effect on cryptocurrency has revealed that public sentiment, expressed on the online platforms, has the power to manipulate the value of bitcoin.
In the first of its kind study, Stevens Institute of Technology researchers collected and analyzed 344,000 public posts over two years on the world's most popular online bitcoin forum, Bitcointalk. They also looked into two months' worth of Twitter data, including more than 3.4 million tweets about Bitcoin.
Stevens School of Business professor Feng Mai, who led the study, says his group has discovered how certain types of comments carry up to ten times more weight than the others.
The value of a bitcoin has soared from approximately $500 in 2014 to its peak of $19,500 in December. Though the most popular cryptocurrency lost two-third of its value since then, this is for the first time that a study reports that the social media's silent majority moves have the power to influence cryptocurrency market fluctuations.
The team's conclusion, recently published in the Journal of Management Information Systems, is that periods of increasingly positive social media comments do in fact influence the rising price of Bitcoin significantly.
"Many of us probably intuitively believe this, but this was the first robust statistical finding to verify that social media and Bitcoin prices are actually linked," Mai says.
Very active social media users' comments and tweets did not move Bitcoin's price much, the study found. However, the "silent majority" — infrequent Twitter and Bitcointalk users who took the time to comment on the cryptocurrency's prospects — moved prices more, as much as ten times, when they posted positive comments.
"It's also true that, by following the infrequent posters' comments, you get a much more accurate prediction of Bitcoin's price over time, and this is useful for investors and potential investors to know," Mai said.
His next potential research project is to investigate blockchain technology and its relationship to social media.
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