Quite a few people have been racking their brains to find out the correlation between the real world factors and the value of Bitcoin. And after all the analyses, finally, a new one offers to take a completely different approach on the issue. Remember when you last went on social media to vent? Well, like a butterfly flapping its wings halfway across the globe and causing a freak storm in some remote area in the opposite direction, so might your sharing have affected the price of Bitcoin.
The Emotional State of Bitcoin
Far from being pop psychology, the research is genuine. It was conducted by researchers in Stevens Institute of Technology in Hoboken, New Jersey. The team led by Feng Mai has found out that Bitcoin’s value may be correlated to public sentiment. Not only that, the value of the crypto gold may, in fact, be manipulated. With this new evidence on the cards, some previous observers who have linked social media behavior with fluctuations in the price now seem widely justified.
In Mai’s official press release, the researcher argues that while it may be a tad “intuitive”, there still seems to be a connection between the two. Positive sentiment, naturally, shoots up the value up. Doom-mongering tanks it without the slightest bit of remorse.
To carry out their work, the researchers trawled gigabytes of data, collecting 3.4 million tweets related to Bitcoin. Then they started studying how the change in price occurred while observing the influx of Tweets.
It was further discovered that infrequent users who commented were more likely to affect the value of the digital currency.
My Fame Might Be My Undoing
In order to get better reads, the team split all users commenting into two camps, that of the “vocal majority” and that of the “silent majority”. It turned out that users who posted more rarely were the ones to actually affect the price of Bitcoin.
Mai’s team commented that: “Vocal users of social media may sometimes have a certain agenda, in this case hyping or boosting the price of Bitcoin because they themselves have invested in it,” said Mai. “So, if most of the social messages around Bitcoin are generated by people who are biased, the sentiments on social media may not accurately reflect the currency’s actual value.”
The team also utilized other channels that are commonly used to discuss cryptocurrencies, including Bitcointalk, which is arguably the largest open forum where people can talk about the cryptocurrency.
Of course, there have been other factors that influence the pricing of Bitcoin. On some occasions, the temporary slump in the value of the crypto unit has not been the reason for concern at all.
The Stanford research is of course just one take on how the price of Bitcoin changes. It may be argued, with a relative success, that social media users simply respond to real-world events and document them online, which is a post-factum statement of matters rather than the driving force behind the changes in Bitcoin’s price.