{"id":3076,"date":"2021-02-07T00:00:00","date_gmt":"2021-02-07T00:00:00","guid":{"rendered":"https:\/\/xcoins.com\/blog\/do-elon-musks-tweets-influence-the-price-of-bitcoin-new-research-examines-the-link\/"},"modified":"2023-12-21T13:36:25","modified_gmt":"2023-12-21T13:36:25","slug":"do-elon-musks-tweets-influence-the-price-of-bitcoin-new-research-examines-the-link","status":"publish","type":"post","link":"https:\/\/xcoins.com\/en\/blog\/do-elon-musks-tweets-influence-the-price-of-bitcoin-new-research-examines-the-link\/","title":{"rendered":"Do Elon Musk&#8217;s Tweets Influence the Price of Bitcoin? New Research Examines the Link"},"content":{"rendered":"\r\n<p>Last week,\u00a0<a href=\"\/en\/blog\/elon-musk-considers-going-big-on-bitcoin\/\">Elon Musk<\/a>, the world\u2019s richest man released a spate of tweets that seemingly endorsed the famous meme-coin, Dogecoin, and narrated the\u00a0<a href=\"\/en\/blog\/what-does-the-gamestop-saga-mean-for-crypto\/\">GameStop short squeeze<\/a>.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>The end of this tweeting rampage was marked by the Tesla CEO changing his Twitter bio to \u201c#bitcoin\u201d. This coincided with Bitcoin (BTC) exiting its week-long stagnation and heading back towards its all-time high.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>Researchers at the Blockchain Research Lab (BRL) have published a\u00a0<a href=\"https:\/\/www.blockchainresearchlab.org\/wp-content\/uploads\/2020\/05\/BRL-Working-Paper-No-16-How-Elon-Musks-Twitter-activity-moves-cryptocurrency-markets.pdf\">working paper<\/a>\u00a0analyzing the effects of the billionaire\u2019s tweets on the price of DOGE and BTC.<\/p>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"h-the-findings\"><strong>The findings\u00a0<\/strong><\/h2>\r\n\r\n\r\n\r\n<p><strong><img fetchpriority=\"high\" decoding=\"async\" class=\"alignnone\" src=\"https:\/\/lh5.googleusercontent.com\/Nawqxi0hBtG8gH5HDIPPgeEl3wlSYkntGJc2vIRHc2Co3l05-OYgpulRP5Wv5R6VBtLo_kc4lipUpyMNDJ2zYcT3HMup8zFLQiqbiFrP9IM-aVpxRoi_UGjyOlrM5Tc4t4xp1C1t\" alt=\"Elon Musk twitter account\" width=\"624\" height=\"327\" \/><\/strong><\/p>\r\n\r\n\r\n\r\n<p>The working paper, titled &#8216;How Elon Musk\u2019s Twitter activity moves cryptocurrency markets&#8217;, analyzes the extent to which tweets made by the Tesla CEO affect the trading volume and price of DOGE and BTC.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>The BRL\u2019s research looked at six tweets relating to the two cryptocurrencies made by the tech billionaire over a period of six months.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>The paper designates each tweet as an event and uses \u2018<a href=\"https:\/\/www.eventstudytools.com\/introduction-event-study-methodology\">event study methodology<\/a>\u2019 to analyze the event\u2019s contribution to trading volume and returns.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>The researchers found that for all of the events studied, there was a significant relationship between theme and both the trading volume and price of DOGE and BTC. Four of the tweets seemingly were only reactions to market activity the study says, while two seem to have caused it.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>According to the paper, when Musk changed his Twitter bio to \u201c#bitcoin\u201d, BTC saw a cumulative abnormal return (CAR) of 6.31% in just 30 minutes. This increased to 13.19%, reaching a height of 18.99% over 7 hours. The second causal event occurred when Musk tweeted \u201cOne word: Doge\u201d. This resulted in a CAR of 8.17% in just 5 minutes, reaching a height of 17.31% in just an hour.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>Cumulative abnormal return (CAR) is the total amount of all abnormal returns over a period of time.<\/p>\r\n\r\n\r\n\r\n<p>These two events highlight \u201cthe significant impact Elon Musk\u2019s Twitter activity can have on\u00a0cryptocurrency markets\u201d, say the study&#8217;s authors.<\/p>\r\n\r\n\r\n\r\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" class=\"alignnone wp-image-3787\" src=\"https:\/\/xcoins.com\/wp-content\/uploads\/2022\/03\/Reddit-1-1024x682.jpg\" alt=\"Reddit app logo\" width=\"1024\" height=\"682\" srcset=\"https:\/\/xcoins.com\/wp-content\/uploads\/2022\/03\/Reddit-1-1024x682.jpg 1024w, https:\/\/xcoins.com\/wp-content\/uploads\/2022\/03\/Reddit-1-300x200.jpg 300w, https:\/\/xcoins.com\/wp-content\/uploads\/2022\/03\/Reddit-1-768x512.jpg 768w, https:\/\/xcoins.com\/wp-content\/uploads\/2022\/03\/Reddit-1.jpg 1100w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"h-comparisons-to-the-gamestock-saga\"><strong>Comparisons to the Gamestock saga<\/strong><\/h2>\r\n\r\n\r\n\r\n<p>The study comes as the investing world is seeing seismic shifts in the participants who are seen as driving markets. Last week, we\u00a0<a href=\"\/en\/blog\/what-does-the-gamestop-saga-mean-for-crypto\/\">investigated<\/a>\u00a0the GameStop (GME) saga, in which a group of Redditors in the\u00a0<a href=\"https:\/\/www.reddit.com\/r\/wallstreetbets\/\">WallStreetBets subreddit<\/a>, prompted by a disdain for \u2018big money\u2019 on Wall Street shorting declining stocks, decided to band together to simultaneously promote and invest in GME.<\/p>\r\n\r\n\r\n\r\n<p>This caused the stock to accelerate upwards, prompting some analysts to advise large Wall Street hedge funds to double down on their bets against GME.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>However, the unrelenting determination of the Redditors, inspired by their determination to \u2018stick it to the man\u2019, quickly left those same analysts recommending positions to be closed and losses cut.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>Whilst this was a group effort, there are comparisons to be drawn to the findings of the BRL study. It is impossible to know the collective wealth of the active participants in a subreddit such as r\/wallstreetbets, or how it might compare to the wealth of someone like Elon Musk, the world\u2019s richest man, but it is likely that when a post gets enough momentum to set the agenda on a subreddit like this, it becomes a market-moving event in much the same way as one of Musk\u2019s tweets.<\/p>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"h-cause-for-concern\"><strong>Cause for concern?<\/strong><\/h2>\r\n\r\n\r\n\r\n<p>While tweets probably only move cryptocurrency markets in extreme cases, Musk is the world\u2019s richest man, after all, is there cause for concern?<\/p>\r\n\r\n\r\n\r\n<p>Whilst Musk has made clear that his cryptocurrency tweets are intended to be jocular in delivery, individuals with his kind of presence could manipulate the market for their own personal gain.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>This extends to groups too, as many in the cryptocurrency market know all too well. There is an abundance of so-called \u2018pump-and-dump\u2019 groups largely inhabiting Telegram. These groups attempt to create hype around a particular project for the purpose of triggering its price to rally. They then quickly \u2018dump\u2019 on unwitting buyers who fall for their malicious promotion.\u00a0<\/p>\r\n\r\n\r\n\r\n<h2 class=\"wp-block-heading\" id=\"h-the-future-influence-of-influencers\"><strong>The future influence of influencers<\/strong><\/h2>\r\n\r\n\r\n\r\n<p>For now, the dedication to freedom in the cryptocurrency industry, from financial freedom to freedom of speech, naturally bodes well for influencers.<\/p>\r\n\r\n\r\n\r\n<p>In a free market, the price of a cryptocurrency will always ultimately be what people collectively decide it is worth. However, this means that\u00a0extremely high net worth individuals like Musk, acting in good humor, genuine support, or out of personal interest, will likely continue to have a large impact on the cryptocurrency markets.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>Unless either regulators step in or the market becomes so big that even the world\u2019s richest man has little influence, we\u2019ll be keeping an eye on Musk\u2019s Twitter. That said, we\u2019ll be making our purchasing decisions firmly based on the core fundamentals of any given cryptocurrency. While the tweets of influencers may lead to short term bubbles in the market, it is your belief in the fundamental value of\u00a0<a href=\"\/en\/blog\/why-blockchain-is-a-gamechanger\/\">blockchain technology<\/a>\u00a0that should drive your decision making, not the whims of Twitter personalities.<\/p>\r\n\r\n\r\n\r\n<p><em>To stay up to date on all things crypto, like Xcoins on\u00a0<\/em><a href=\"https:\/\/www.facebook.com\/xcoinsofficial\"><em>Facebook<\/em><\/a>,\u00a0<em>follow us on\u00a0<\/em><a href=\"https:\/\/twitter.com\/realxcoins\"><em>Twitter<\/em><\/a><em> and enter your email address at the bottom of the page to subscribe.<\/em><\/p>\r\n","protected":false},"excerpt":{"rendered":"<p>Last week,\u00a0Elon Musk, the world\u2019s richest man released a spate of tweets that seemingly endorsed the famous meme-coin, Dogecoin, and [&hellip;]<\/p>\n","protected":false},"author":17,"featured_media":1907,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[740],"tags":[],"class_list":["post-3076","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-analysis-2"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.1 (Yoast SEO v27.2) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Research: how do Elon Musk&#039;s Tweets Influence Bitcoin? 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