Exchanges offer all sorts of sophisticated metrics and charts to help investors predict how the market will turn. A new research study shows that it might all mean very little when compared with trends found on Google and Twitter.
Southern Methodist University, in their paper titled “Cryptocurrency Price Prediction Using Tweet Volumes and Sentiment Analysis,” looked into how the market performs in relation to tweets and Google searches. They were attempting to discover if positive or negative sentiment somehow had an impact on the market, or vice versa.
What they discovered was that sentiment had very little to do with the performance of the market. Because of the number of automated twitter accounts, particularly on Twitter, sentiment for the market is always positive on balance. They wrote:
“People who tweet about cryptocurrencies even when their prices drop have an interest in them beyond investment opportunity making the tweets biased towards positive.”
Where they made revelations was in the volume of interest, specifically pertaining to Bitcoin Core (BTC) and Ethereum (ETH). When the team looked at Google analytics, they found that searches into crypto spiked shortly before the price would shoot up. They found the same correlation in tweet volume and price.
If this research holds up, it provides a valuable insight into what really drives the market, and it makes a lot of sense. Moving averages and Bollinger bands look great on charts, but the biggest driver of increasing prices is interest from the general public and greater adoption. If the public are starting to tweet and search about more cryptos, odds are very good that prices will respond accordingly.
It’s also a great reminder not to believe everything you read on twitter. Everyone wants you to invest in their favorite alt-coin because they have financial reasons to gain from it. That’s why their sentiment will always be positive to tokens they favor, and negative to competitors. The best bet is to research the fundamentals of the token you’re interested in, and invest in it because they are achieving the plan they are focused on, and working towards real enterprise usage and mass adoption.
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.