Bitcoin’s Musk impact: Analysis exhibits how Elon strikes cryptocurrency costs

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The impact of movie star tweets on the cryptocurrency market has change into a subject of research for researchers after per week during which Elon Musk triggered sizable value surges for each Bitcoin (BTC) and Dogecoin (DOGE).

Blockchain Analysis Lab printed a paper on Jan. three titled, How Elon Musk’s Twitter exercise strikes cryptocurrency markets. The paper seems to be at six events when Elon Musk tweeted about cryptocurrency and makes an attempt to measure the resultant affect on the buying and selling quantity and spot value of the cash in query.

“We examine the affect of Elon Musk’s Twitter messages on cryptocurrency markets. By making use of occasion research methodology, the affect of six Twitter occasions from 2020 and 2021 on return and buying and selling quantity of the talked about cryptocurrency is analyzed,” the paper states.

Of the six tweets, 4 have been associated to Dogecoin and two have been associated to Bitcoin. The paper concludes that each one six occasions had an affect on the buying and selling exercise of each cryptocurrencies, particularly their commerce quantity:

“Throughout all occasions, we determine vital will increase in buying and selling quantity which might be attributable to the occasions.”

The most important affect the paper notes on Dogecoin got here in December, quickly after Musk despatched out the tweet: “One phrase: Doge”.

Previous to the tweet, Dogecoin was being traded round 9 occasions per minute, with a mean buying and selling quantity of $1,942. Within the 30 minutes instantly following the tweet, commerce quantity jumped to $299,330 per minute and the variety of trades climbed to 775, the paper states.

Not each tweet despatched out by Musk affected the value of Doge or Bitcoin, however two did end in vital “cumulative irregular returns.” 

“4 of the Twitter actions are probably solely reactions to earlier market occasions and relate to little or no vital value reactions. The opposite two occasions, nonetheless, don’t appear to be reactions however unbiased actions which end in enormous will increase in buying and selling volumes and enormous and vital constructive irregular returns,” the paper states.

The most important affect Musk had on Bitcoin got here on Jan. 29, when the SpaceX and Tesla CEO added the phrase “Bitcoin” to his Twitter bio. As reported on the time, the worth of Bitcoin surged inside minutes of the brand new addition to Musk’s Twitter profile, and climbed practically 20% within the hours following:

“Musk’s Twitter biochange to #bitcoin resulted in vital CAR of 6.31% over 30 minutes, which elevated to 13.19% over one hour and peaked at 18.99% over a interval of seven hours. [His tweet] One phrase: Doge resulted in vital CAR of 8.17% over a window of 5 minutes, peaking at 17.31% over the interval of 1 hour.”

To this point, Musk’s dalliance with cryptocurrency has been nothing however constructive, and, with the frequent use of memes, even humorous. Nevertheless, because the paper states, analogous analysis in different markets has already proven that the capability for influencers to negatively affect the worth of an asset through social media posts can also be very actual:

“Whereas Musk’s conduct and communication will be deemed constructive or humorous in nature (and due to this fact arguably uncritical), comparable analysis has already revealed that adverse tweets also can have a adverse affect on monetary returns.”

The researchers acknowledge that the difficulty of influencing markets is just not native to the cryptocurrency house. The identical issues exist within the inventory market and did so lengthy earlier than the GameStop saga triggered by collective merchants on r/Wallstreetbets.

Addressing the difficulty of public influencers is an ominous job and one which might undoubtedly broach the query of freedom of speech. But, because the paper concludes, the distinction between the ‘proper’ tweet and the ‘flawed’ tweet could possibly be a whole bunch of billions of {dollars}.

“Our outcomes result in the query underneath which circumstances individuals within the public eye ought to touch upon particular cryptocurrencies. If a single tweet can doubtlessly result in a rise of $111 billion in Bitcoin’s market capitalization, a special tweet may additionally wipe out an identical worth,” the paper ends.