KUALA LUMPUR, MALAYSIA – Media OutReach Newswire – February 14, 2024 – Social media can have a significant, sometimes critical, impact on the reputation of public companies and their listings. Cryptocurrency influencers often have considerable influence on the value of cryptocurrencies. For more information, read the article. In modern conditions, social media creates an environment in which the principles of interaction between people are fundamentally changing. Today, everyone can instantly interact with large numbers of people via social media, which can have a significant effect on the reputation of public companies and their listings.
First calls and dive into the heart of the story
The first case revealing the potential threat of social media to the financial sector occurred in 2013. On April 23 at 1:08 p.m., a fake tweet from a hacked Associated Press account stated: ‘Two explosions at the American White House, Barack Obama injured.‘ Stock prices immediately fell, wiping the value of the S&P 500 by more than 0.9%, or $130 billion, in less than three minutes. This was the first such case on Twitter, and as is often the case on Twitter, it was brief and superficial. The Associated Press itself was quick to clarify the falsehood of these messages, the White House confirmed it, and the markets recovered the next day.
Social networks as a political tool
Another striking example of Twitter’s impact on financial markets is the messages of former US President Donald Trump. He used his Twitter account to report crucial economic news and repeatedly threatened Chinese officials with tariff hikes, sometimes causing market and investment turmoil.
According to Bank of America Merrill Lynch, U.S. stocks have tended to fall on days when Trump tweets more than 35 times and rise on days when he tweets fewer than five times. JPMorgan even created
‘Volfefe Index‘, playing on Trump’s viral typo ‘covfefe‘ he tweeted in 2017 to track market movements in response to the president’s social media activity. During Donald Trump’s most prominent social media activity, JPMorgan noted that ‘the tweets increasingly stirred US interest rate markets immediately after their publication.‘
“There is indeed a correlation between traders’ sentiment, which can be assessed on the basis of tweets, and market movements: an increase of 1% in the ‘negative sentiment’ indicator is followed by a drop of 0.03 percent of the exchange rate,” Kar Yong Ang said. , Octa’s financial markets analyst. “However, the effect does not last more than an hour. The tool is therefore not suitable for long-term forecasting,” he added.
During Donald Trump’s presidency, major financial conglomerates created special indices that tracked the correlation between his tweets and the volatility of the US stock market. Updating these indexes is now on hold, as it has been almost three years since Trump last tweeted about current affairs and the economy as US president.
Previous presidents have not maintained the same social media presence — and some critics suggest that Trump’s tweets have put inappropriate pressure on politically independent agencies such as the Fed. All of this has led to a permanent erosion of central bank independence during Trump’s tenure, with investors no longer perceiving the Federal Reserve as independent of the executive branch.
This reinforces that a strong media personality is a thought leader and can influence capital markets.
The impact of social networks on cryptocurrency prices
The rise of cryptocurrencies has become a major issue in recent years, and it is impossible to ignore the impact of social media on market patterns and price movements. Social media has played an important role in encouraging the use of cryptocurrencies for payments. Users often share information about the latest market trends and developments on leading cryptocurrency discussion sites, including X (formerly Twitter) and Reddit.
Cryptocurrency influencers often have a significant effect on the value of cryptocurrencies, especially minor altcoins, because followers value their opinions and may decide to invest in specific cryptocurrencies through their advice . However, this can also lead to market manipulation and ‘pump and dump‘ scams, where influencers artificially increase the price of a cryptocurrency before profitably selling their assets.
Memes are another way social media influences cryptocurrency prices and market movements. On social media, memes are a common means of communication, and memes about cryptocurrencies have gone viral in recent years. For example, the famous “To the Moon” meme is used to express excitement about the potential of a particular cryptocurrency.
Although memes may seem like innocent entertainment, they can have a big impact on the value of cryptocurrencies. A certain cryptocurrency may increase in value due to the hype that memes can generate. However, if the fundamentals behind this enthusiasm are strong, the promotion might only last for a while and prices could fall.
As we can see, the penetration of social media in the financial world is intense and only gets stronger every year. In addition to classic fundamental and technical analysis, a third dimension emerges, thanks to which it is possible to track short-term price movements and use this information as an additional investment opportunity.
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