Can Twitter and Google Trends be utilized to predict the price of Bitcoin and Ethereum?
Researchers at Southern Methodist University, Texas released data they say suggests that Twitter and Google search activity may influence the price of the two largest cryptocurrencies by market cap. According to the research,
“We identify the correlations that exist between Bitcoin and Ethereum prices and Google Trends data.”
Strong correlations were identified between Twitter and Bitcoin prices with the number of tweets on Twitter preceding price changes.
The research also identified the differing effects of sentiment analysis and tweet volume on prices.
“Sentiment of tweets was determined to not be a reliable indicator when cryptocurrency prices were falling so it is not included. Both Google Trends and tweet volume were highly correlated with price. In addition, the correlation held during periods of increasing and decreasing prices suggest that the relationship is robust to periods of high variance and non-linearity.”
“The findings of our analyses show that sentiment analysis is less effective for cryptocurrency price changes in an environment in which prices are falling. This is because tweets about cryptocurrencies tend to be objective in nature (not having a clear sentiment) or positive regardless of price changes.”
Traders are using a number of tools to identify crypto market sentiment. The popular aggregator CoinTrendz identifies the top 10 cryptocurrencies by Twitter activity every hour.
— CoinTrendz.com (@CoinTrendz) May 7, 2019
The Crypto Fear and Greed Index is another tool used to analyze the market. The index, created by developers and creators of Strawpoll.com and Thundercheck.org, analyzes market volatility, surveys and social media to identify where the market may be heading.
Currently, Ethereum leads the top 10 coins, up 10.23% to $178.63 compared to Bitcoin, which is up 1.87% to $5,818 and XRP which is up 1.51% to $.304.