The Impacts Of Social Media On Bitcoin Performance

Bitcoin has a decentralized structure and it is only present online; so, it value is not derived from government fiat currencies or from gold, but rather from the value that people have assigned to it. So, changes in Bitcoin performance or price should relate to discussion or opinions posted on social media. It is here that investors will interact with one another and provide insights about the market. So, both user-generated content and social media play a crucial role in investments. Social media can capture the people’s wisdom and offer cost-friendly platforms for connecting to target audiences.

As far as the Bitcoin goes, online messages on social media will help to throw new light or reveal information that can affect Bitcoin valuations. For instance, when a new store starts accepting Bitcoins or some regulations are brought in that limit Bitcoin uses, it will have an effect on its performance. So, online discussions can be great indicators of the overall market sentiment in favor of or against Bitcoins, and this in turn affects Bitcoin value. Speculative investors will follow such trends. This is why it is believed that user-generated content impacts investment returns or trade volumes.

To start with, most of the earlier Bitcoin users were individual entities and they would contribute to social media sites more often; they would also be more impacted by social media. A big motivation for these earlier Bitcoin users was to get positive public opinion via social media. For instance, when Zynga, the social gaming brand added Bitcoins to its games, it gathered thousands of media posts. Finally, most Bitcoin users are also heavy social media site users. It is not surprising therefore why social media metrics impacted Bitcoin returns. When sentiments were increasingly positive or negative, the returns were higher while social media disagreements meant higher trade volumes.

In social media, most users belong to the silent majority which will only contribute to conversations from time to time and usually after some important event. They are not keen to generate a buzz. Besides, social media users belong to various groups and this will obviously have an effect on their tweeting behaviors and user-generated content. Most of the grassroots users are typically the silent majority and their content will be the bigger metric for investors. The vocal minority however impacts the Bitcoin market more than the silent majority.

Moreover, different types of social media websites will affect markets in different ways. For instance, online forums will have an atmosphere of collaboration where everyone seeks to give solutions to a specific query. But in a micro-blogging site like Twitter, the communications will go forward from the sender onto his followers. They then spread the information further through re-tweets. Twitter supports a much wider range of possible ties where social relationships are established with other users through persistent connections. This is bound to have an impact on user-generated content. Experts note that since investors have less attention span, they will respond more to information they can see. Relationship between Bitcoin values and discussion patterns should be seen at a daily level, while Bitcoin market reactions to Twitter news can happen even within a day because of the mobile nature of this social media platform.