The impact of celebrity tweets on the cryptocurrency market was a topic of research for researchers a week later when Elon Musk caused a big jump in prices for both Bitcoin (BTC) and Dogecoin (DOGE).
The Blockchain Research Lab published a report on January 3 titled “How Elon Musk’s Twitter Activity Affects Cryptocurrency Markets”. The newspaper examines six cases in which Elon Musk tweeted about the cryptocurrency and is trying to gauge the resulting effect on the volume and spot price of the currencies in question.
“We study the impact of Elon Musk’s Twitter posts on cryptocurrency markets. Using a systematic research method, we analyze the impact of six Twitter events from 2020 to 2021 on profitability and trading volume for the specific cryptocurrency,” the document states.
Of the six tweets, four were linked to Dogecoin and two were linked to Bitcoin. The document concludes that all six events affected the trading activity of each of the cryptocurrencies, in particular the volume of trading:
“For all events, we notice a significant increase in trading volume associated with these events.”
The Dogecoin banknote had the biggest impact in December, shortly after Musk posted a tweet, “One word: Doge.”
Prior to this tweet, Dogecoin traded around nine times per minute, with an average volume of $ 1.942. The newspaper reported that within 30 minutes immediately after it was posted on Twitter, volume jumped to $ 299,330 per minute, and the number of deals rose to 775.
Not every tweet Musk sent affected the price of Doge or Bitcoin, but two resulted in large “irregular cumulative returns”.
“It is possible that the four Twitter actions are merely a reaction to previous market events and do not involve much or little reaction to the price. However, the other two events do not appear to be a reaction, but are independent actions that lead to a massive increase in trading volume,” stated in the document. Significant and significant abnormal returns. ”
Musk’s biggest influence on Bitcoin was on January 29, when the CEO of SpaceX and Tesla added the word “Bitcoin” to his Twitter bio. As reported at the time, the Bitcoin value increased within minutes of Musk’s addition to his Twitter profile, increasing by nearly 20% in the following hours:
Musk’s bio-formation on Twitter on #bitcoin resulted in a big car of 6.31% in 30 minutes, which rose to 13.19% in one hour and peaked at 18.99% over a period of 7 hours. [His tweet] One word: Doji produced a whopping 8.17% CAR in five minutes, peaking at 17.31% in one hour. ”
So far, Cryptocurrency Masker’s hobby has been very positive and also enjoyable with frequent use of memes. However, as the document says, similar studies in other markets have already shown that the ability of influencers to negatively impact asset value through social media posts is also very real.
“While Musk’s behavior and communication can be considered positive or funny (and thus possibly non-critical), research like this has already shown that negative tweets can also have a negative impact on the bottom line financial outcome.
Researchers acknowledge that the problem of influencing the markets is not inherent in the cryptocurrency space. The same problems exist in the stock market, and they arose long before the GameStop saga, which mass traders released on r / Wallstreetbets.
Solving the problem of public figures is a daunting task that will undoubtedly address the issue of freedom of expression. However, the newspaper concluded that the difference between a “correct” and a “wrong” tweet could run into hundreds of billions of dollars.
“Our findings lead to questioning the conditions under which the public should comment on certain cryptocurrencies.” If one tweet is likely to lead to an increase in Bitcoin’s market value of $ 111 billion, another tweet could also destroy a similar value, according to For the article.