How Social Media Influence Cryptocurrency Prices and Moods
https://eclipcoin.com/blog/socialmediaimpact
Market sentiment is the attitude, feelings, and opinions of investors regarding an asset. They do not necessarily reflect the fundamentals of an asset or a project, but they can significantly affect their price.
Analysis of market sentiment is a study with the aim of predicting price changes. Tracking the dynamics of the market taking into account the sentiments of its participants makes it possible to conclude about the level of interest or fear of investors regarding a particular cryptocurrency. The price of a cryptocurrency, like other assets, is directly related to market supply and demand, which, in turn, can change under the influence of public opinion, media, and social networks.
Many traders analyze market sentiment to predict the potential of crypto assets in the short to medium term. Along with the technical and fundamental analysis, studying cryptocurrency market sentiment can be a valuable addition to a trader’s toolbox.
Why Is Market Sentiment Analysis So Important?
Market sentiment analysis is an integral part of many trading strategies, along with technical and fundamental analysis. It helps investors evaluate all available information before making any decisions.
For example, sentiment analysis can help determine whether the FOMO (fear of lost profits) is justified by market participants or simply caused by public opinion. In general, the use of technical and fundamental analyzes together with sentiment analysis allows:
- Getting a better understanding of short and medium-term price movements;
- Better controlling your emotional state;
- Discovering potential profit opportunities.
Let’s now have a closer look at how social media works as a tool for predicting crypto prices.
Social Media Marketing as a Powerful Influential Tool
In the early stages, those who used to create content for social media did not obtain solid ROI. Describing cryptocurrencies just the way they used to be was not that much exciting. Even sharing such a type of content did not bring the expected results at first. However, soon, bloggers realized how to make money out of nothing. Well, almost nothing. They realized the importance of fake news and public figures. Soon, the growing role of crypto provided content creators with a great avenue to get compensation for their hard work and sleepless nights.
Today, social media is one of the driving communication channels. It has most of the power when it comes to the news spread. Many of them are rumors, but it does not affect the fact that people get easily hypnotized by what social media tells them. This power is the one to decide on the overall picture of various tokens for the masses. This double-edged sword can either make a cryptocurrency extremely popular or, vice versa, completely ruin its reputation. Sure, those are famous people and companies that decide on the fate of particular coins. However, they use social media as a means of doing so.
If the picture is flattering, you can see an immediate jump in the specific coin’s price. It is true that social media impacts traders and investors more than official business and finance sources like Forbes, Business Insider, or The Guardian. Who would want to read a lengthy text full of smart terms and stats instead of simply grabbing another 100-word Facebook post and “eat” every single word they say? Even the most experienced investors get on the hook of social media reps. The following platforms have the highest impact on their decisions:
- TokTok
The most active and influential crypto investors are celebrities and IT geniuses (e.g., Elon Musk, Snoop Dogg, Gene Simmons, etc.) How should you know when their words make sense? We’ll try to explain it to you.
ElonOMeter: What’s That and How Does It Work?
A website has appeared on the network that tracks the impact of Elon Musk’s tweets. This man is the founder of Tesla and SpaceX. The site called ElonOMeter specializes in what Elon Musk thinks and says about the capitalization of cryptocurrencies. The dev.by edition drew attention to this.
The creators of the website note that Elon Musk is now the most influential person in the crypto universe. People who follow and trade on the crypto market often don’t understand how to respond to tweets from the founder of Tesla and SpaceX. The developers are convinced that analyzing Musk’s statements on Twitter will help users study their impact on the “emotional” market and make better and more informed decisions.
The site is updated after each tweet by Elon Musk. One of the last publications was a post with a Bitcoin badge and a broken heart that the founder of Tesla and SpaceX published on June 4. This tweet from Musk plummeted the Bitcoin rate by 3.4% on the same day.
The site also has an interactive chart called Elon’s Crypto Hustle, a crypto plot. It shows the dynamics of the cryptocurrency market based on Musk’s Twitter posts. By clicking on each column, you can see how the cryptocurrency market capitalization has changed and follow the link to the tweet, after which the jumps occur.
The graph shows data from January 2021. This was the only month that the founder of Tesla and SpaceX contributed to the growth of the market. ElonOMeter has some funnier metrics too. For example, Musk’s mood scale. It works this way: after each tweet, an arrow moves on it. 0% means Elon is Sad while 100% means Elon is Happy. Now, as you can see, he is rather sad.
Verdict
No one can deny that social media is a powerful tool. FB posts, as well as TikTok videos, are instruments used to drive up cryptocurrency prices. It does not matter whether the post is positive or negative — this post will have an effect in any case.
Social media platforms impact the crypto maturation stage due to their educational strength. More and more accounts pop up with the only purpose — to teach people about the role of cryptocurrencies and factors that influence their price. Education is how the game is called. The plethora of social media platforms is astonishing.
