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Does Social Media Influence the Prediction of Bitcoin Prices

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    The purpose of this paper is to analyze if social media platform such as twitter has an influence on Bitcoin related tweets which would indicate a price change. Bitcoin is such a prevalent topic throughout Social Media especially, Twitter which is such a reliable source to collect data on cryptocurrencies and explore if there is a relationship between tweets and returns. I would conduct research by collecting Bitcoin daily returns over the past five years and daily search all tweets and hashtags on twitter relating to bitcoin. Based on that data I would analyze if there is a relationship between twitter and Bitcoin prices. I would try to understand the impact of the number of daily tweets and returns can provide a purchasing and selling advantage to a cryptocurrency user or a trader.

    In today’s economy, the cryptocurrency market has been growing steadily since 2008 to present day. While there are over 1,300 cryptocurrencies existing, one of the most well-known and influential cryptocurrencies that had made an impact in today’s economy is Bitcoin (BTC). Cryptocurrency is a type of digital currency that is in the form of a virtual coin. The virtual coin acts like a commodity such as gold or silver. However, cryptocurrency does not have any intrinsic value unlike gold. There is not a fundamental coin that exists for individuals to be able to hold in their hand or put in their wallet.

    Bitcoin was the first cryptocurrency that was developed in 2009. The idea for Bitcoin originated in 2008 with a published paper under the pseudonym, Satoshi Nakamoto. Satoshi’s concept of developing a peer-to-peer electronic cash system that would allow individuals to make online payments directly from one party to another without going through a third party. With that vision and goal for a decentralized system, Satoshi created cryptocurrency. Satoshi’s idea for Bitcoin started in 2008, and this digital asset was made available to the public in 2009.

    Bitcoin is a well-recognized cryptocurrency, and it has a supply cap of 21 million coins. With a set amount of Bitcoin (BTC), obtaining one full or partial share of a Bitcoin became competitive. Cryptocurrency operates in a decentralized exchange system, which means that funds can be transferred between two parties without going through a central financial institution. On the other hand, when transactions occur in a centralized system, the financial institution can charge the individual a service fee to transfer funds to another party. Also, the receiving end can charge individuals with a service fee and conversion fee if individuals are transferring funds internationally. Transactions involving cryptocurrency do not require verification of the individual’s identity unlike financial institutions. All transactions are traced by computers that have a universal ledger. The universal ledger is accessible to everyone participating in the digital exchange.

    Satoshi Nakamoto published a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” which he described a peer-to-peer payment system using electronic cash also known as cryptocurrencies which could be sent to and from one party to another without the use of a third party to authorize the transaction. This revolution is called blockchain. Blockchain is which a shared ledger on the peer-to-peer network where all transactions are verified by the network so they cannot be forged [1]. Blockchain technology provides security, privacy, and a distributed ledger which makes them applicable for many applications, such as healthcare, distributing storage systems, much, much more. [2]. Wide variety of applications of blockchain has led to more blockchains and cryptocurrencies. Cryptocurrencies come hand to hand in blockchain because cryptocurrency is created and stored electronically in the blockchain. Using special techniques to control the making of monetary funds and verify the transfer of its funds. [3] As use of blockchains increases so too will the use of cryptocurrencies.

    Twitter first launched in July of 2006 and since then it’s been growing. Twitter is also known as microblogging. Microblogging is smaller and more frequent updates than blogging. Twitter allows users to post messages publicly which is referred to as “tweets” with a maximum length 280 characters recently changed in November of 2017. Twitter users can add “hashtags” to a tweet, which is the “#” symbol followed by several characters. The hashtag is used to identify the topic or theme of a tweet and to make them searchable or whatever it is the user wishes to talk about.

    In 2018, 500 million tweets are sent each day that’s equivalent to 5,787 tweets every second. Over the years twitter has become one of those social media sites where news is quickly spread, and things become viral just in seconds Twitter is used as a news source influencing purchase decision for both sellers and buyer by informing users of the currency and its growing popularity. According to Twitter statics 71% of Twitter users are using their account for the most up to date and latest news. Twitter is also the number one platform for government leaders. 40% of users say they’ve made a purchase because of an influencer’s tweet. Twitter is one social media platform which ranges from kids to adults, celebrities to politicians and most importantly a place where you’re able to talk about anything and freely speak your opinion on almost anything without any judgement as such, like everything else, opinions and information about anything a is available on Twitter. Bitcoin is such a prevalent topic throughout Social Media especially, Twitter which is such a reliable source to collect data on cryptocurrencies and explore if there is a relationship between tweets and returns.

    References

    1. Nakamoto, S.: Bitcoin: A peer-to-peer electronic cash system. In: Cryptography Mailing list at https://metzdowd.com
    2. Miraz, M.H., Ali, M.: Applications of blockchain technology beyond cryptocurrency. CoRR abs/1801.03528
    3. https://www.pwc.com/us/en/industries/financial-services/fintech/bitcoin-blockchain-cryptocurrency.htm

    Does Social Media Influence the Prediction of Bitcoin Prices. (2021, Aug 25). Retrieved from https://graduateway.com/does-social-media-influence-the-prediction-of-bitcoin-prices/

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