This paper analyses correlations and causalities between Bitcoin market indicators and Twitter posts containing emotional signals on Bitcoin. Within a timeframe of 104 days, about 160,000 Twitter posts containing ”bitcoin” and a positive, negative or uncertainty related term were collected and further analysed.

The static (daily) Pearson correlation results show a significant positive correlation between emotional tweets and the close price, trading volume and intraday price spread of Bitcoin. However, a dynamic Granger causality analysis does not confirm a causal effect of emotional tweets on Bitcoin market values. To the contrary, the analysed data shows
that a higher Bitcoin trading volume Granger causes more signals of uncertainty within a 24 to 72-hour timeframe.

This result leads to the interpretation that emotional sentiments rather mirror the market than that they make it predictable. Finally, the conclusion of this paper is that the microblogging platform Twitter is Bitcoins virtual trading floor, emotionally reflecting its trading dynamics. Twitter signals play a crucial part in the cryptocurrency market.

While behavioral economics suggest that emotions can affect individual behavior and decision-making, the microblogging platform Twitter has drawn more and more attention from different disciplines as a laboratory to study large sets of social and economic data. Particularly interesting is the influence of Twitter users and information propagation. Download this research paper to find out more.