How Social Media Impacts Bitcoin Value?

How Social Media Impacts Bitcoin Value

The value of bitcoin has skyrocketed recently, and while many people are asking what’s behind this sudden rise, others are wondering how social media plays into it all. This article will examine the impact that social media has on the value of bitcoin and see if there’s any correlation between the two. What do you think? Are social media and bitcoin value related?

In April of 2017, the price of bitcoin hit an all-time high of $1,244. The cryptocurrency’s value has fallen to below $200 in the months since then and currently sits at around $400, but what’s driving this digital currency’s rise and fall? In theory, the market value of bitcoin should be determined by its users, who have an incentive to transact with this currency rather than another because it has lower fees and is easier to store and transfer than traditional money.

Introduction

Social media is changing today’s economy because of its ability to reach so many people. The internet can be used as a megaphone for any message; including cryptocurrency like bitcoin. Many crypto-currency experts have predicted that bitcoin value will increase with more social media usage. There are others who say that social media users will not care about online currency and therefore do not affect bitcoin value. One of these groups is known as The Silent Majority, they believe that a change in social behavior will not greatly impact bitcoin’s value.

The theory what does it mean for investors?

The silent majority hypothesis predicts that while vocal minorities can have a huge impact on social media, social media plays no real role in influencing actual behaviors. Because of the way social media works, and because of basic human nature, people tend to be strongly influenced by their friends and acquaintances. People who have strong opinions often influence those around them without even meaning to do so.

In fact, studies show that social media posts are more likely to provoke comments than they are action; people will often just agree with something on Facebook or Twitter without doing anything else about it. This has negative implications for startups trying to get customers; if people aren’t active advocates for your product or service but just passively agree with your postings when you engage them, how effective is your business actually being?

How can you leverage this knowledge in your investments?

I found a fascinating correlation between social media use and bitcoin value that I think should change how you think about both subjects. In short, more people are talking about bitcoin online when its price goes up and there is far less activity when prices fall in fact, some of these connections are so strong that they can predict changes in price with up to 93% accuracy.

Here’s what all of that means... The first step was looking at overall search interest for bitcoin over time (on Google Trends). There are three periods where it spiked: January 2014, December 2017, and March 2018. To get a better idea of why interest increased during those times, I looked at Twitter mentions over time as well (on Twitter Analytics).

The pattern was even clearer here: When prices were high on exchanges like Coinbase or Kraken or Local Bitcoins or Gemini they were being talked about on Twitter as well. You could almost literally see bitcoin trending in real-time on social media sites like Reddit and Twitter as soon as people began posting about it again following a drop in price or an increase in transaction volume on one of those exchanges. What does that mean?

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