Social Media’s Impact on Bitcoin Price Driven by ‘Silent Majority,’ Researchers Claim

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In a market heavily influenced by sentiment, social media has emerged as a key driving force in how cryptocurrencies are priced from day to day.  Now, a study has tried to quantify that impact.

The ‘Silent Majority’

To the extent that bitcoin prices are influenced by social media, the so-called ‘silent majority’ has a far more direct impact on market behavior, according to researchers at the New Jersey-based Stevens Institute of Technology. More active users were found to have a much lesser impact.

The study evaluated social media trends on Twitter, which has emerged as a hotbed of activity for the cryptocurrency market and the primary venue for FOMO (fear of missing out) and FUD (fear, uncertainty and doubt). A total of 3.4 million tweets were analyzed, as well as 344,000 BItcointalk forum posts over a period spanning 24 months.

“Interestingly, social media’s effects on bitcoin are driven primarily by the silent majority, the 95 percent of users who are less active and whose contributions amount to less than 40 percent of total messages,” researchers Feng Mai, Zhe Shan, Qinq Bai, Shane Wang and Roger Chiang wrote in the paper’s abstract.

The silent majority is more likely to influence prices because everyday posters are considered more trustworthy than the so-called influencers pushing a particular agenda.

Another research paper produced by the Stevens Institute of Technology corroborated this view by suggesting that the sentiments of everyday users is a “more important metric in predicting the movement of future prices” in the crypto market.

Social Media’s Crypto Clampdown

Twitter was quick to follow Facebook and Google in banning all advertisements related to cryptocurrencies and initial coin offerings (ICOs) over consumer safety concerns. For Twitter, the ban was paradoxical given Jack Dorsey’s unrelenting support for digital assets.

Earlier this week, Facebook announced it was reversing its blanket ban on digital currency ads, opting instead to scrutinize applicants’ business model and service offerings. It’s not entirely clear whether Twitter will follow suit.

While social media has been shown to have a direct influence on investor sentiment, it plays a far lesser role in generating traffic for crypto exchanges. That’s because only a tiny percentage of exchange traffic is generated through paid advertising. This was later confirmed by Similar Web, which evaluated referral data for digital currency exchanges.

The researchers concluded that paid search accounts for less than 1% of traffic to cryptocurrency exchanges.

Referring to Facebook’s and Google’s ban on crypto-based ads, Liron Hakim Bobrov of Similar Web said the following:

“Despite this tightening of restrictions from the two biggest advertising platforms, there is little chance that this will have a major impact on the flow of traffic to the top cryptocurrency exchange sites, given that until now paid search was responsible for less than 1% of their traffic.”

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi