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Peak Hype: Timing Cryptocurrency Tops with Social Media Data

Peak Hype: Timing Cryptocurrency Tops with Social Media Data

Over the past few years, a growing number of Wall Street and cryptocurrency analysts have started to rely on a relatively underutilized source of information to try and beat their respective markets with: social media.

For obvious reasons, social media is seen as a potential treasure trove of market sentiment information, and the macro analysis of forum messages, twitter comments and other social data to gain an edge has quickly been embraced by veteran quants. However, the ability of this data to actually and accurately predict price trends and develop new market alpha is still hotly contested by many crypto traders.

Hopefully, our latest study might finally put an end to this debate.

Trading Crypto with Social Media Data

At Santiment, we gather a amount of information from social media to try and determine its impact on the crypto market. As you read this, our system is collecting all incoming messages from over 1000 crypto-specific social media channels, including hundreds of Telegram groups, crypto subreddits, vetted twitter accounts, professional trader chats not indexed by Google and more.

We’ve already developed various market indicators using this dataset, like our ‘Social Volume’ metric which shows the amount of coin-specific mentions on crypto social media over time:

The amount of ‘Bitcoin’-related mentions on crypto social media over the past year (Source: Sanbase)

Though the initial results looked promising, in the early days of building our social dataset we too weren’t really sure whether this tool will end up producing any actionable insights about the crypto market, or mostly prove to be trivial intelligence or useless noise.

We quickly found out it was going to be the former.

Timing Price Tops by ‘Peak Hype’

The first real clues about the usefulness of social media data came when we created Emerging Trends, a handy list of ...

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