Bitcoin & Social: The Cryptocurrencies Interdependency

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Mark Mitchell Social Media Director, MySocialAgency

Posted on April 20th 2013

Bitcoin & Social: The Cryptocurrencies Interdependency

Is Bitcoin Social or is Social Bitcoin – The Cryptocurrencies Interdependency Bitcoin’s quite the little minx isn’t it? The digital currency has been on a wild ride of late and has managed to engross not just the hard core internet users, but the world in general.

From a standing start at $7.20 around 15 months ago, Bitcoin managed to hit $266 at around a week ago, before taking a hit and falling back to around the $100 mark and now it’s rising again. It doesn’t take a stock market expert to realise that it’s quite a volatile item.

One of the more interesting aspects is its link to social media. Like any stock, currency or investment, confidence and trust are major factors in determining worth. In Bitcoin’s case they’re significant and maybe even the only factors, as outside of these two areas there is little real value to the cryptocurrency.

In a lot of ways Bitcoin is the first real investment area that a lot of normal people are taking a gamble in since the dot com boom of the late 1990s. Back then people invested in rapidly growing companies with skyrocketing prices, somewhat similar in the way a Bitcoin graph looks.

Voyeuristic Dot Com

However, unlike 15 years ago, sites such as MTGox and others offer not only instantaneous Bitcoin prices, but also in-depth graphs on all sorts of analysis. This certainly creates a voyeuristic nature to the whole currency. And like any reality show or entertainment, the social media second screen has to come into play.

Unlike the slow and often laboured kerfuffle of the dot com chat room, users nowadays have instant access to the entire goings on, amateur predictions and pseudo-financial insight of Twitter and other social media sites. Anyone familiar with Twitter’s commenting on Bitcoin in the last few weeks and with knowledge of human sentiment of a bust and boom cycle can certainly see some similarities to any similar scenario.

Sentiment

In short, on the way up to the $266 mark there was a distinct feeling of we’re going to be millionaires, while on the way down panic selling was exacerbated by Chinese whispers and spread like wildfire. The ‘I told you so’ trolls trolled and Bitcoin owners sold. However, unlike a traditional boom and bust, social media made Bitcoin look like it was in financial overdrive.

Of course, there were a number of reasons for the fall and the downing of central exchange MTGox was certainly one. However, there is no way that the Bitcoin Millionaire’s actions on Reddit can be ignored either – all of which remained intrinsic with the panic selling and drop in positive sentiment towards the currency.

In a world of viral media, handing out $13,000 of Bitcoins and then informing the world they’re going to be worth nothing, is a sure fire way to get attention. This action and the social media haze that followed could certainly be seen as something that spurred on the fall in worth.

Is Bitcoin Social or is Social Bitcoin – The Cryptocurrencies Interdependency

Predictions via Social Media

Another aspect that’s worth noting is the use of social data to predict rises and falls in the currency. The online nature of Bitcoin means that it most likely trends and is talked about on social platforms more-so than any other investment or stock there is. This means that social data can certainly be in part used to predict its value.

Of course, social media is often utilised in equity markets to predict rises and falls, though it is less reliable as there are numerous other outside factors. Bitcoin however is ideal for social data prediction.

- Bitcoin traders and social media users are on the general the same demographic. This means that sentiment can be easily predicted.

- It is traded by the individual in the most part.

- Social media is the talking shop for events that affect the cryptocurrency

- Value is determined by market demand. While the number of Bitcoins in the market is easily predictable. This makes it easier to measure than most other investments.

In turn, many believe that Bitcoin prices, sentiment and future value can be determined by social media to a large extent.

So, will Bitcoin last – well nobody can say for sure. However, one thing we’ve seen is an increasing number of businesses accepting the digital currency for payment of goods and services. This could be a sign that it’s becoming mainstream, though one could also argue that it’s merely a PR ploy for businesses that take the currency.

In conclusion, social media certainly inspires a mob mentality and in the case of any form of investment of this nature, sentiment and confidence matter a lot. Outside factors aside from social media certainly affect Bitcoin prices (i.e. hacking, MTGox’s reliability and security issues). However, social media reflects this on a hyper level, creating both ups and downs at a super-fast rate. As we’ve seen from the actions of the Bitcoin millionaires, all it takes is one blow for a house of cards to shake. Whether Bitcoin has the foundations is the big question.

How do you feel about Bitcoin and other cryptocurrencies? Have you ever dealt in a digital currency before? Tell us in the comments section below.

Mark_3000

Mark Mitchell

Social Media Director, MySocialAgency

Social Media Director for MySocialAgency a UK based digital marketing agency. In my spare time a massive travel addict, tech and music geek. I am a deep thinker and love to add a human touch to otherwise faceless marketing content.

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