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Efficient Market Hypothesis on the blockchain: A social‐media‐based index for cryptocurrency efficiency

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  • Efstathios Polyzos
  • Ghulame Rubbaniy
  • Mieszko Mazur

Abstract

This paper proposes the use of social media as a proxy for financial information. Using an extended sample of 53,580,759 tweets and employing text analysis tools (Latent Dirichlet Allocation and Term Frequency–Inverse Document Frequency), we determine the information being exchanged on any given day. We train machine‐learning classifiers and forecast crypto price movements for more than 8000 cryptocurrencies and gauge market efficiency through successful forecasts based on public information. We propose various metrics of market efficiency for cryptocurrency assets and demonstrate that market efficiency is higher during the first 6 months after the Initial Coin Offering. We also examine the efficiency behavior of individual currencies during crisis periods.

Suggested Citation

  • Efstathios Polyzos & Ghulame Rubbaniy & Mieszko Mazur, 2024. "Efficient Market Hypothesis on the blockchain: A social‐media‐based index for cryptocurrency efficiency," The Financial Review, Eastern Finance Association, vol. 59(3), pages 807-829, August.
    • Handle: RePEc:bla:finrev:v:59:y:2024:i:3:p:807-829
    DOI: 10.1111/fire.12387
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    Cited by:

    1. Samuel Kaplan & Efstathios Polyzos & David Tercero-Lucas, 2025. "Crypto Listens: Asymmetric Reactions to Text-based Signals in Central Bank Communications," Working Papers 365, Red Nacional de Investigadores en Economía (RedNIE).
    2. Hoang, Lai & Vo, Duc Hong, 2024. "Google search and cross-section of cryptocurrency returns and trading activities," Journal of Behavioral and Experimental Finance, Elsevier, vol. 44(C).

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