DataLight Longreads

What Can Twitter Tell You About Investing in the Top Cryptoassets?

April 5, 2019

author:

What Can Twitter Tell You About Investing in the Top Cryptoassets?

While cryptocurrency price movements can often seem to be somewhat of a mystery, it can be useful to look at social media sentiment, as part of your fundamental analysis.

The DataLight Hype Index is a useful tool which collects data from social media on mentions of a cryptoasset to measure its current popularity by how much it is being discussed on various social channels and what the sentiment of discussion is.

You can easily analyze Hype index as well as dozens of other metrics in DataLight Lab.

Here we look at the top 15 coins by Twitter Hype, there is clearly a correlation between the DataLight Twitter Hype Index and market captitalization. In this article we take a look at why this is and which coins standout, and how influencers and crypto communities engage with Twitter.

TOP-15 coins by Twitter Hype infographics

Unsurprising Leaders

The infographic below shows the Twitter Hype Index for the top 15 most popular cryptoassets on Twitter.

Perhaps unsurprisingly, the top 3 cryptoassets in terms of Twitter Hype Index are bitcoin (BTC), ethereum (ETH) and XRP, corresponding exactly to the top 3 by market capitalization.

Also as you might expect, bitcoin’s popularity on Twitter dwarfs that of its closest rival, Ethereum. Aside from bitcoin’s position as the first and most dominant cryptocurrency within the crypto space itself, it’s likely that bitcoin’s name recognition and fame beyond the crypto industry contributes to its enormous popularity on Twitter.

Ethereum vs. TRON

Firstly, it’s worth noting that TRON has managed to achieve a level of popularity on Twitter that greatly exceeds its position as the 11th largest cryptoasset by market capitalization, in an impressively short amount of time.

Beyond this however, an interesting dynamic has been playing out on Twitter between the two Dapp platforms, Ethereum (ETH) and TRON (TRX).

Ethereum founder Vitalik Buterin and TRON founder Justin Sun have time and again taken swipes at each other and their platforms. There is some controversy surrounding Justin Sun’s Twitter followers, which came to a head when he recently surpassed 1 million followers on Twitter. Several analysts drew attention to the legitimacy of the followers – with researcher Geoff Golberg highlighting that 20,000 of Sun’s most recent 50,000 followers were accounts created within the month of his announcement.

What remains evident though is the extent to which Sun and the TRON community have expertly leveraged Twitter to promote the coin and garner attention.

‘XRP Army’ and the Ripple Effect

There is no question that one of the most engaged communities on Crypto Twitter are fans of XRP and Ripple. Known as the “XRP Army,” this community of followers has recently drawn suspicion from many in the space.

In a lengthy investigation by Coindesk in January, David Floyd drew attention to the way in which the XRP community distinguishes itself mainly “through scale and organization,” utilizing XRP and XRP related hashtags effectively, and mobilizing as a unit to defend XRP and Ripple’s reputation.

Geoff Golberg specifically analyzed the nature of the community’s support. Aside from identifying what he believes to be at least 8,000 outright fake accounts, he highlights how a set of accounts creates content which is replicated by a network of other accounts, generating more retweets and likes and so registers a ripple effect (no pun intended) of false enthusiasm for XRP. Furthermore, he identifies a trend where apparent bots follow each other, using XRP or Ripple-based hashtags in their bios to make use of algorithms that disseminate the message.

Other Standouts: BNB, XMR, EOS and BCH

Some other standout features of the data from the Hype Index are some other altcoins which see a popularity on Twitter at odds with their market caps.

One such coin is BNB (Binance Coin) the native coin of the Binance exchange. Seeing its price and attention soar in tandem with the exchange’s popularity, the coin has seen particular interest this year with the release of the Binance Launchpad platform for new ICO (or IEO – Initial Exchange Offering) sales – as new coins can only be bought with BNB.

Moreover, like Justin Sun, Binance CEO Changpeng Zhao – or “CZ” has also used Twitter expertly to draw attention to Binance and BNB, cultivating a substantial following of over 313,000.

XMR, XEM and MIOTA are three altcoins that have garnered attention on Twitter beyond what would have been expected based on their market caps – possibly due to enthusiasm in the space for the three altcoins’ more distinctive blockchains and ideas. XMR and XEM are two of the older cryptoassets in the top 15 and their relatively high Twitter Hype may be due to their well established presence in the crypto twitter community.

Conversely, two leading altcoins by market cap – EOS and BCH (bitcoin cash), have a lower Twitter Hype and both assets are less than two years old, this could explain their low Twitter Hype compared to the relatively large market caps.

What Does This Mean For Traders?

As traders will know, fundamental analysis of an asset is always a key component of trading strategy.

One important aspect of fundamental analysis is undoubtedly investor sentiment, and with Twitter likely representing the largest pool of investors on social media, the popularity of and mood towards a given asset is a useful indicator for price analysis.

Other than inferring general bulllish or bearish trends, the Hype Index can help an investor more specifically. If for example, surging prices are not accompanied by positive movements on the Hype Index, investors might be wary of buying in. While a rising Twitter Hype Index that is not accompanied by a rising price, could help investors identify undervalued cryptoassets.

Share this article