4 Ways Social Media Is Turning Tables For Crypto Investors
We have all seen firsthand how social media affects stock prices. After AMC and GameStop saw huge gains from conversations on social media and other forums, several people dubbed 2021 the year of the meme stocks. These forums are increasingly among millennial investors’ top investment advice sources. Even more exciting is the possibility that social media may play a significant role in how crypto investors assess the future of crypto assets.
Twitter makes money
“Finance Goes Social” is one of the three main trends in the Twitter Trends 2022 study. The straightforward interpretation of this trend is that, like many other topics discussed in the contemporary public sphere, investing is increasingly a topic of discourse on social media. This may be seen as a quantitative supplement to social media discussions. However, that would overlook an undercurrent altering how people approach investing.
On social media, people are attempting to learn more about investment. They want to know other people’s opinions, where other people are investing, helpful advice, and more. Social media users blogging about finance differ from those who share their favorite meals, vacation places, or dogs.
Throughout 2020 and 2021, there were more than one billion tweets about cryptocurrencies, according to Twitter’s internal data. From 2020 to 2021, there was a sixfold increase. Only in January 2022, there were 299 million tweets about cryptocurrencies. Compared to 2020, tweets about finances generally jumped 78% in 2021.
Millennials use social media
Who uses social media to seek advice? A CNBC poll released in August 2021 demonstrated precisely how much social media is becoming a significant source of information for investors. The results of a poll carried out by Creditcards.com in March 2021, 28% of Gen Z and 24% of millennials are likely to obtain investment advice from social media. On social media, 12% of persons in the 18–34 age group learned how to invest. 37% of those between the ages of 18 and 34 and 17% of those between the ages of 35 and 64 used social media to study investment ideas.
According to an M1 Finance survey from January 2022, about 60% of millennials and members of Generation Z have made an investment decision due to social media.
In a survey of US adults that our company, eToro, conducted, it was discovered that 40% of respondents would not feel confident investing on their own and that 60% of respondents said that information on social media increased their confidence in investing. 80% of respondents said they use social media as a source of investment information.
Social media and cryptocurrency
If social media now impacts the world of money in general, it has a more significant impact on the world of cryptocurrencies. The explanation is that social media fills a niche that is missing from the overall investment landscape.
Social media may provide cryptocurrency with an essential estimate of worth, something that average assets like equities lack.
The quarterly earnings reports that are released serve as the foundation for the value of joint assets like stocks. These reports act as a stabilizing force for purchases whose values may change in response to the evolving conditions and investor sentiment. The stock price may benefit from the earnings reports or serve as a sobering reminder of the asset’s true worth.
This anchor does not exist in crypto. It is not a typical business with a financial structure. Instead, sentiment will serve as the foundation for most cryptocurrency valuations. Social media may give users real-time insight into the direction in which that attitude is moving.
Social media can gauge cryptocurrency sentiment.
One potential gauge for gauging sentiment in the cryptocurrency market is social media. The popularity of cryptocurrencies and their performance are directly related. TheTie claims that Social Market Analytics (SMA) parses through 850,000,000 tweets daily using machine learning and natural language processing technology to determine sentiment regarding cryptocurrencies.
The performance of purchasing a basket of the top 100 coins is equally weighted and divided into the top 20% of coins with the most sentiment and the top 20% of coins with the lowest feeling, as shown in this chart from TheTie. From the start of 2021 through July 2022, buying the coins with the top 20% of the highest sentiment each day and holding them for a day produced a return of 1,907%. Purchasing the top 20% of most popular currencies daily during this period produced gains over 20 times greater than Bitcoin and 4 times greater than Ethereum.
The black line shows the performance outcome over ten months of buying all cryptocurrencies in the top 20% of sentiment and selling all cryptocurrencies in the worst 20% of the view. An over 800% return on investment was the outcome.
These figures suggest a link between optimistic emotion and returns on cryptocurrency investments. These figures demonstrate that positive sentiment can help look for advice regarding where and how to invest if someone is eager to enter the cryptocurrency market.
Future trends can be found on social media.
2021 marked a turning point for social media’s influence on financial choices. Younger individuals who use social media more regularly and in more significant numbers are more aware of this impact. Furthermore, younger generations are more heavily reliant on social media than older generations are. In the upcoming years, social media’s influence on conventional investing and cryptocurrencies might grow.
Given that, sentiment and social media could be considered when predicting an asset’s future course. This is particularly true in cryptocurrency, where social media debates and emotions can be seen as an addition to fundamental study.