Interplay between Cryptocurrency Transactions and Online Financial Forums

Abstract

Cryptocurrencies are a type of digital money meant to provide security and anonymity while using cryptography techniques. Although cryptocurrencies represent a breakthrough and provide some important benefits, their usage poses some risks that are a result of the lack of supervising institutions and transparency. Because disinformation and volatility is discouraging for personal investors, cryptocurrencies emerged hand-in-hand with the proliferation of online users’ communities and forums as places to share information that can alleviate users’ mistrust. This research focuses on the study of the interplay between these cryptocurrency forums and fluctuations in cryptocurrency values. In particular, the most popular cryptocurrency Bitcoin (BTC) and a related active discussion community, Bitcointalk, are analyzed. This study shows that the activity of Bitcointalk forum keeps a direct relationship with the trend in the values of BTC, therefore analysis of this interaction would be a perfect base to support personal investments in a non-regulated market and, to confirm whether cryptocurrency forums show evidences to detect abnormal behaviors in BTC values as well as to predict or estimate these values. The experiment highlights that forum data can explain specific events in the financial field. It also underlines the relevance of quotes (regular mechanism to response a post) at periods: (1) when there is a high concentration of posts around certain topics; (2) when peaks in the BTC price are observed; and, (3) when the BTC price gradually shifts downwards and users intend to sell.

Trading Cryptocurrencies as a Pandemic Pastime: COVID-19 Lockdowns and Bitcoin Volume

“…We control for CBOE volatility index (VIX) returns, gold returns, and S&P 500 returns. Previous studies have shown that the level of attention and sentiment to Bitcoin in social networks can be used to provide additional insight on Bitcoin activity [20,[23][24][25], therefore we also control for the level of attention and sentiment toward Bitcoin using Google search frequencies for the key term "Bitcoin" and the tone of Tweets discussing Bitcoin. All variables are defined in Appendix A.…”