"You can't sit with us!" - Does social media REALLY influence the price of Bitcoin?
We're looking at you ShitCoin...
When Bitcoin was first explained to me many moons ago, there was one catchy phrase that stuck with me, "It's a currency by the people, for the people". With no government or bank to back it up, I still believe to this day, that no matter what, Bitcoin will always be the peoples currency.
But in a world where Instagram tells us what to look like, and Facebook tells us whats happening in the outside world, Twitter tells us who's angry at what in 140 characters or less, and Snapchat tells us which celeb has lost the plot this week, would it be a fair assumption to say Social Media tells us whether to fill or empty our beloved exchange wallets?
While going from InstaModel to InstaHodl might sound like a fair jump, the social media Crypto influencer may not be as far fetched as we think...
Are forums even still a thing?
Bitcoin's elusive founder, Satoshi Nakamoto, started the virtual conversation himself, by creating the first Bitcoin forum, forum.bitcoin.org, which, many of us now recognise as Bitcointalk.org. Users had an open platform to discuss the future of what we now know as Bitcoin with the anonymous architect, with many of these threads still available to read, originating from nearly a decade ago!
The Platforms of Now
"The best minds to listen to are the ones that are twit....ter users"
While the ol' bitcointalk still kicks around to this day, the driving force of the Crypto-Conversation, appears to have moved to the mainstream sources. Make no mistake, the 140 character limit isn't enough to deter those who have something to say in the Twitterverse! The ability to discuss the disposition of any crypto climate in live time, draws a crowd like no other, with many of the community's leading experts having some sort of a twitter presence.
If Character limits and tin-foil-hat rants aren't really your thing, the next thing to look out for is Medium - the eye into the developer minds of some of Blockchain's leading design teams.If you're ever looking for anything tech that's happening now, It's highly recommended you check it out - but be warned, you could end up down some serious rabbit holes!
Looking for something lighter? Discussion groups may be the way to go. Facebook and Telegram offer users the ability to join or create their own chat rooms, based on their own knowledge level, interests, investment habits, and even gender. In my experience, these platforms have a great lead effect to IRL (In real life) meet ups, which is great for those who need to get out of the house more!
And last, but not least, Reddit! The lite forum which boasts over 800,000 members to their most popular crypto subreddit (/r/Bitcoin of course!) has some of the most active communities available across the whole platform. If a Coin exists, you can guarantee it has a subreddit, and if it doesn't, you can head to the next best thing, /r/Cryptocurrency - which is sitting at around 650,000 members - to find someone to chat with. The best thing to watch for in these groups are the AMA (Ask Me Anything) posts, and the posts from the up-and-commers.
Well done, you've named a few social media sites which completely wasted my time. How is this supposed to help me trade coins?
I'm glad you asked Mr. Attitude... In 2014, a study lead by David Garcia of the ETH Zurich institute of Switzerland (Which ironically, has nothing to do with Ethereum) found an interesting link between social media activity surrounding Bitcoin, and the price of bitcoin rising. (While the data used was gathered from now defunct exchanges, (specifically Mt Gox) It could be argued that the information portrayed by the study is tainted. You can certainly make up your own mind by viewing the full study here)
" Bitcoin has experienced periods of rapid increase in exchange rates (price) followed by sharp decline; we hypothesize that these fluctuations are largely driven by the interplay between different social phenomena. We thus quantify four socio-economic signals about Bitcoin from large data-sets: price on online exchanges, volume of word-of-mouth communication in online social media, volume of information search and user base growth. "
From this, Garcia and his colleagues were able to distinguish two strong correlations between these parameters - The increase in popularity, increased the demand, thus pushing the popularity of Bitcoin on social media, and, the higher the rate of exchange sign ups, the higher the price. While this may sound like "common sense" to some, an interesting event to factor in, is that spikes in searches of specific news surrounding bitcoin, would be preceded by a drop in price.
In other words, the hype created on social media, would cause the price to go up, until someone did their research, and decided to sell out.
But not everything on the internet is real. What about all them internet trolls?
Is this Illuminati confirmed?
Those little chat boxes you see on trading/exchange sites? They don't call them "Troll Boxes" for nothing! The internet can be a very dark and grueling place - as one site taught me:
"The stories and information posted here are artistic works of fiction and falsehood. Only a fool would take anything posted here as fact."
And the same will forever be true about Bitcoin. FUD (Fear, Uncertainty and Doubt) will continue to plague Crypto communities, so long as the internet lives. While we may be able to pick out the obvious cases of"Fake News", unfortunately, our tolerance levels are all different, thus, we must anticipate what others are willing to believe - Play the panic seller!
In smaller markets, where the outcomes are easier to manipulate, pump and dump schemes can run rampant - and with discussion groups throughout Facebook, Telegram, Reddit, etc. dedicated to the cause, it can certainly be seen as the unethical traders guide to making a quick buck off of unsuspecting traders.
Now its time for some Audience participation!
To round off this post, I'd like to end it with something social.. A vote! Does what you see on social media effect the decisions you make when buying or selling? Or do you ignore the mainstream flow? Be sure to leave your answer below, and let me know what you think in comments section!