Impact of Social Media in Crypto (Part 8)
Today I going to share some statistics from the past where it was experienced greatly the impact of social media on the crypto market.
Elon Musk's Tweets and Bitcoin Price Movements in 2021 should be the first one on the list. He tweeted that Tesla would suspend vehicle purchases using Bitcoin due to environmental concerns. Within hours, Bitcoin's price fell from approximately $54,819 to a low of around $46,980. But in June 2021, Musk's positive tweets about Bitcoin and potential plans for Tesla to accept Bitcoin again contributed to a rapid price increase.
A coordinated effort on Reddit could elevate the price of an altcoin from $0.10 to $1.00 per token within hours. These movements are the result of community sentiment and speculative trading. Studies found that a one standard deviation increase in the number of tweets mentioning Bitcoin can lead to a 2.5% increase in Bitcoin returns within the next two days.
A coordinated effort on Reddit's r/WallStreetBets and other social media platforms pumped the price of Dogecoin (DOGE) from $0.007 to over $0.08 per token within a few days.
When China announced a crackdown on crypto mining and trading in May 2021, Bitcoin's price plummeted from around $40,000 to below $30,000 per Bitcoin. Understanding these dynamics and their financial implications is crucial for investors.
The daily price volatility of Bitcoin can be increased by 10% to 20% during periods of heightened social media activity. This volatility translates into significant fluctuations in USD terms. A positive endorsement from a prominent influencer can lead to price increases of 50% to 100% or more within days. General tweets or criticism can cause similar magnitudes of price declines.
If Bitcoin is trading at $50,000 per Bitcoin and experiences a 2.5% increase due to heightened social media activity, it could result in a price increase of $1,250 per Bitcoin within a short period. A tweet causing a 10% price increase on crypto trading at $1 per token would equate to a $0.10 increase per token in USD terms. An altcoin pumped from $0.50 to $5.00 per token and subsequently dumped could lead to significant losses for investors and illustrate the speculative nature of social media-driven trading strategies.
~ Regards,
VEIGO (Community Mod)
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