Social Sentiment in Crypto Trading: Giving Traders an Edge

social sentiment crypto trading tools

 

Crypto traders are always looking to get an edge, but can frequently struggle when trying to isolate what matters and what doesn’t when it comes to cryptocurrency market prices.Many people, from the most experienced in the field to the person who just got introduced to cryptocurrency, have theorized that social sentiment played a big role in dictating certain coins’ prices.

Traders, but especially less experienced ones, have been putting a significant amount of emphasis, on social sentiment that they find on their favorite crypto-specific or non crypto-specific social media websites.

RoninAi sees that social sentiment has a large impact on cryptocurrency prices, and thus it was a no-brainer to include it as one of the features in the crypto trading tool that is being developed. The team thoroughly understands that there are a multitude of patterns and indicators of future market value, so covering every corner of a market that’s so shrouded in mystery is crucial.

Even news.Bitcoin.com agrees social sentiment is one of the most important indicators that is often overlooked.

 

 

However, rolling out a feature that is only theoretically important to the end user wasn’t good enough, so the RoninAi team, including the multiple PhD’s on the team, conducted a series of tests to measure the impact of social sentiment on cryptocurrency prices. These tests were aimed at examining not only if the crypto market went up and down with social sentiment (or if it’s the other way around), but if social sentiment could be used as an accurate predictor, and if it was, to what extent.

What the team found confirmed what they, along with much of the tuned in crypto world, have come to hypothesize. Social sentiment is, in fact, an excellent predictor of future cryptocurrency prices. Not only does social sentiment matter, the findings of the RoninAi team show that it matters quite a bit, and that having access to a tool that can parse thousands of tweets or posts and relay information can give crypto traders of all experience levels a massive leg up. Not just in measuring buzz, but analyzing sentiment as being bullish or bearish.

“Spikes in conversation volume often precede spikes in search volume by one full day, and new price highs by one to three days. Indicating beyond just a clear correlation between social sentiment and crypto market prices, the former is in fact directly affecting the latter.”

– Sergey Krutolevich, RoninAi Research Scientist, PhD in Applied Statistics

One other important finding by the RoninAi team is that social sentiment was not driven by a handful of the most popular and talkative Twitter accounts. Instead, it’s driven more than expected by people who were less vocal about crypto and not terribly active, perhaps suggesting that many crypto investors put more value on information from sources that do not influence cryptocurrency social sentiment professionally or based on an agenda.

social sentiment crypto analytics tools

The team also found that it wasn’t enough for someone to just be talking to influence social sentiment, but they needed to be particularly and clearly bullish or bearish for their words to have any effect on the market. While notable crypto accounts were able to cause some small and very temporary changes in cryptocurrency prices, the large and impactful changes in cryptocurrency prices were brought along by a mass of people who all had similar sentiments at similar times.

Run by Stevens Institute of Technology’s Feng Mei, another study similarly found the strong corollation between social sentiment and cryptocurrency prices, as well as what they call “the power of the silent majority.”

“This was a big finding, and it does seem to prove that people are trusting the silent majority much more, perhaps because they do not seem to have an agenda”

– Feng Mai, Stevens Institute of Technology

Moving forward, experts are in agreement about the importance of external trading tools. In an article where RoninAi Research Scientist Sergey Krutolevich was featured, Bitcoinist, a giant in crypto news, affirmed what many had believed:

“Experts all across the board have been concluding that more than technical analysis, social sentiment is one of the most powerful indicators of crypto market price.”

Bitcoinist

The world of cryptocurrencies is erratic, confusing, and frequently very hard to understand. External tools ensure that you have access to a high density of the most important information, filtering out the static. To expand upon this, the RoninAi team of experienced crypto and blockchain professionals believe that tools that do not take social sentiment into account are lagging behind the times and aren’t painting the full picture of the cryptocurrency market.

 

bitcoin cryptocurrency social sentiment impact

 

Unfortunately for traders, there are not many crypto trading tools that currently offer social sentiment analysis. Those that do have a social sentiment component are unreleased, or simply do not analyze social sentiment in a way that paints a full picture or can be tangibly beneficial for its users.

However, RoninAi has social sentiment analysis as a core part of its crypto trading tool, which is being launched soon. The work done by the RoninAi team on this topic ensured that it would remain a cornerstone of the RoninAi trading tool. Beyond that, just how much of an important factor social sentiment is, is now known, meaning that the detail with which RoninAi’s social sentiment analysis goes into makes it in a league of its own.

We will be rolling out a more in depth look into social sentiment analysis in our future posts, so stay tuned.

Related article: Crypto Trading Tools: RoninAi vs. TradingView