Cryptocurrencies are digital currencies that are secured by cryptography. They can be transferred directly between users without going through a bank. When the word ‘crypto’ is used together with other words, it generally refers to cryptocurrencies. The most popular cryptocurrency is Bitcoin, and its price fluctuates a lot. Although it has fluctuated over time, many people still believe that Bitcoin’s price is affected by social media platforms’ attitudes towards it.
Research revealed that price fluctuations of a cryptocurrency are likely to be attributed to the public’s perception of the value of that particular cryptocurrency. In other words, if the public believes that a cryptocurrency is low-valued; cryptos decrease its price accordingly. For example, when Facebook banned cryptocurrency ads, it caused a major drop in the value of some cryptocurrencies like Bitcoin or Ethereum. It also caused some investors to stop buying these cryptocurrencies since they thought their prices had dropped too far already. However, social media platforms have also provided good news about cryptocurrencies to increase investor confidence again; this way, investor sentiment indirectly impacts the market price of cryptocurrencies.
Investors had to trust information provided on social media websites when deciding whether to invest in cryptocurrencies or not. These websites were where initial coin offering (ICO) projects first advertised their new Initial Public Offerings (IPOs). The latter refer to when an existing cryptocurrency undergoes an initial distribution of its tokens to early adopters and investors - essentially creating more demand for its tokens. Since many investors were uninformed about cryptocurrencies at this point and needed help making decisions, social web portals became essential for launching and promoting these projects - as well as advertising goods sold using newly created cryptocurrencies. To increase user engagement and reduce advertising fraud, however, these platforms took steps such as banning ICO advertisements promoting low value coins or coins associated with scams or Ponzi schemes. Consequently, users would no longer find low-value coins interesting since they would now know this type of investment was prohibited on these platforms.
Thus, it was easy for crypto enthusiasts who had high-value coins in their possession at this time to affect investor sentiment through social media channels towards their chosen coin. This way they could increase demand for their chosen coin and make more money themselves! According to some researchers “the power of money is what allows people who have it access power over other people who don’t have it." Social media has played an important role in educating people about new technologies like cryptocurrencies but also has its downsides such as reducing investor risk appetite towards scams or low-value projects associated with them. Therefore, future predictions should take into account how current attitudes towards cryptocurrencies portrayed through social media channels may be affecting prices— especially since prices may be reduced due to public trust in information presented on these channels versus actual value of the chosen cryptocurrency itself.