Impact of Tweet Sentiments on the Return of Cryptocurrencies: Rule-Based vs. Machine Learning Approaches

In an attempt to assess the appropriateness of the best-practice lexicon-based approaches as opposed to novel learning-based models to extract the sentiment of textual content in the context of the cryptocurrency market, the current study provides further insights into the association between digital activity and price movement of cryptocurrencies. Using a sample of Bitcoin and Ethereum trade data, this study compares the performance of Harvard IV-4 and BERT models in conjunction with the well-known machine learning classifiers. It examines to what extent learning-based sentiment models can enhance the price movement prediction, compared to lexicon-based approaches, and whether the prediction is improved or impaired by introducing different features as input to the classifiers. Results indicate that the contribution of the selected learning-based model varies across the two cryptocurrencies, and predictions are better in the absence of trade volume as an input feature to the classifiers.