The impact of movie star tweets on the cryptocurrency market has turn out to be a subject of examine for researchers after per week wherein Elon Mu
The impact of movie star tweets on the cryptocurrency market has turn out to be a subject of examine for researchers after per week wherein Elon Musk triggered sizable value surges for each Bitcoin (BTC) and Dogecoin (DOGE).
Blockchain Analysis Lab revealed a paper on Jan. three titled, How Elon Musk’s Twitter exercise strikes cryptocurrency markets. The paper appears at six events when Elon Musk tweeted about cryptocurrency and makes an attempt to measure the resultant impression on the buying and selling quantity and spot value of the cash in query.
“We examine the impression of Elon Musk’s Twitter messages on cryptocurrency markets. By making use of occasion examine methodology, the impression of six Twitter occasions from 2020 and 2021 on return and buying and selling quantity of the talked about cryptocurrency is analyzed,” the paper states.
Of the six tweets, 4 had been associated to Dogecoin and two had been associated to Bitcoin. The paper concludes that every one six occasions had an impression on the buying and selling exercise of each cryptocurrencies, particularly their commerce quantity:
“Throughout all occasions, we establish vital will increase in buying and selling quantity which can be attributable to the occasions.”
The largest impression the paper notes on Dogecoin got here in December, quickly after Musk despatched out the tweet: “One phrase: Doge”.
Previous to the tweet, Dogecoin was being traded round 9 instances per minute, with a median buying and selling quantity of $1,942. Within the 30 minutes instantly following the tweet, commerce quantity jumped to $299,330 per minute and the variety of trades climbed to 775, the paper states.
Not each tweet despatched out by Musk affected the value of Doge or Bitcoin, however two did end in vital “cumulative irregular returns.”
“4 of the Twitter actions are doubtless solely reactions to earlier market occasions and relate to little or no vital value reactions. The opposite two occasions, nevertheless, don’t appear to be reactions however impartial actions which end in enormous will increase in buying and selling volumes and huge and vital constructive irregular returns,” the paper states.
The largest impression Musk had on Bitcoin got here on Jan. 29, when the SpaceX and Tesla CEO added the phrase “Bitcoin” to his Twitter bio. As reported on the time, the worth of Bitcoin surged inside minutes of the brand new addition to Musk’s Twitter profile, and climbed practically 20% within the hours following:
“Musk’s Twitter biochange to #bitcoin resulted in vital CAR of 6.31% over 30 minutes, which elevated to 13.19% over one hour and peaked at 18.99% over a interval of seven hours. [His tweet] One phrase: Doge resulted in vital CAR of 8.17% over a window of 5 minutes, peaking at 17.31% over the interval of 1 hour.”
To this point, Musk’s dalliance with cryptocurrency has been nothing however constructive, and, with the frequent use of memes, even humorous. Nonetheless, because the paper states, analogous analysis in different markets has already proven that the capability for influencers to negatively impression the worth of an asset by way of social media posts can be very actual:
“Whereas Musk’s conduct and communication could be deemed constructive or humorous in nature (and subsequently arguably uncritical), related analysis has already revealed that damaging tweets may have a damaging impression on monetary returns.”
The researchers acknowledge that the problem of influencing markets will not be native to the cryptocurrency house. The identical issues exist within the inventory market and did so lengthy earlier than the GameStop saga triggered by collective merchants on r/Wallstreetbets.
Addressing the problem of public influencers is an ominous activity and one which might undoubtedly broach the query of freedom of speech. But, because the paper concludes, the distinction between the ‘proper’ tweet and the ‘incorrect’ tweet may very well be lots of of billions of {dollars}.
“Our outcomes result in the query beneath which circumstances individuals within the public eye ought to touch upon particular cryptocurrencies. If a single tweet can doubtlessly result in a rise of $111 billion in Bitcoin’s market capitalization, a distinct tweet might additionally wipe out an identical worth,” the paper ends.