A group of scientists from the University of Pennsylvania analyzed the impact of news background and social media discussions on returns on cryptocurrency investments, revealing some interesting patterns.
A group of researchers from the University of Pennsylvania analyzed financial articles in news publications and comments on social media related to more than 300 cryptocurrency projects. Based on this analysis, they derived 53 metrics that were compared to actual investment returns on the same projects over a period of time.
The main findings of the study are:
- social media has a huge impact on the activity level of traders;
- the news media has almost no impact on the sentiment of crypto users.
Thus, the analysts claim that the news background in the media that can influence the volatility of cryptocurrencies has almost no effect on traders’ decisions.
On the other hand, the authors of the study conclude that user sentiment in social networks regarding any cryptocurrency leads to increased interest in it, which in turn affects the return on investment in this digital asset. Therefore, social media seems to predict the movement of crypto quotes.
The researchers found that the profitability of cryptocurrencies is primarily influenced by the sentiments of users, which they demonstrate through social channels. The scientists recorded a direct link between the surge in demand for a certain asset and the hype around it on social networks.
According to the study authors, this trend is primarily since many private investors with large crypto portfolios are engaged in social media. They actively demonstrate their experience and achievements in social networks, and users often make investment decisions based on their expertise.
Social networks are recognized as the most vulnerable area of the Web3 space. Read about why investors depend on the information field in a special article by CP Media.
