Want to understand how#KOLson social media influence your investment decisions? A new paper co-authored by Kenneth J. Merkley, Joseph Pacelli, Mark Piorkowski, and Brian Williams provides insight.
Data examples:
In the short term, the average cryptocurrency return on the day a tweet was posted was 1.83%. In the long term, the average cryptocurrency return fell to -6.53% within 30 days of a tweet being posted.
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- Research has found that tweets from cryptocurrency influencers are associated with positive returns in the short term, but over the long term these tweets often lead to significant negative returns.
- The results show that especially influencers who claim to be experts in cryptocurrency trading and valuation, as well as those with more Twitter followers, have a more significant impact of their tweets on the cryptocurrency market 34.
- The study also found that influencers who claim to be experts may be motivated to “pump and dump,” a behavior that can have negative consequences for investors
Research methods
- Analyzed 36,000+ tweets, classified using machine learning, covering 1,600+ cryptocurrencies.
- The impact of cryptocurrency influencers’ tweets on investment returns was studied by analyzing tweets and cryptocurrency price movements on a large number of social media platforms.
- Use machine learning methods to classify and analyze sentiment of tweets to understand the impact of tweet content on investment outcomes.
- The impact of social media on the cryptocurrency market is revealed through statistical analysis of social media activity data.
Merkley, Kenneth J., et al. "Crypto-influencers." Available at SSRN 4412017 (2023).
