Tweetonomics: The Relation Between Twitter Sentiment & Cryptocurrency Returns

The emergence of an increasingly digital world has changed the way people invest and gather information about investments. Cryptocurrencies are a new and increasingly popular asset class, worth trillions of dollars in total market capitalization and billions of dollars in daily trading volume. Social media provides users with access to information beyond traditional news and information outlets. Social media users can not only gather news-related information but also read and discuss other users’ opinions. Much discussion on social media is related to investing in assets, including the cryptocurrency (often referred to as crypto) market. On social media, specifically Twitter, communities exist that focus entirely on investing in cryptocurrency. Influencers who have followers on Twitter, give the followers their opinions about crypto and even listen to their followers’ views. Often influencers and other Twitter users encourage one another to buy or sell cryptocurrencies. These discussions are a reflection of user sentiment and by extension, public sentiment. Sentiment has been demonstrated to have a significant impact on asset market performance. This presentation investigates the relationship between Twitter sentiment and cryptocurrency market returns. Using Machine Learning tools to extract the sentiment from the tweets, our analysis uses hourly data on tweet sentiments and price of 10 top currencies (as per market cap) and our results show that there is a positive relationship between the sentiment and returns from cryptocurrency investments.