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Interplay between Cryptocurrency Transactions and Online Financial Forums

Author

Listed:
  • Ana Fernández Vilas

    (Information & Computing Lab, AtlanTTic Research Center, University of Vigo, 36310 Vigo, Pontevedra, Spain)

  • Rebeca P. Díaz Redondo

    (Information & Computing Lab, AtlanTTic Research Center, University of Vigo, 36310 Vigo, Pontevedra, Spain)

  • Daniel Couto Cancela

    (Information & Computing Lab, AtlanTTic Research Center, University of Vigo, 36310 Vigo, Pontevedra, Spain)

  • Alejandro Torrado Pazos

    (Information & Computing Lab, AtlanTTic Research Center, University of Vigo, 36310 Vigo, Pontevedra, Spain)

Abstract

Cryptocurrencies are a type of digital money meant to provide security and anonymity while using cryptography techniques. Although cryptocurrencies represent a breakthrough and provide some important benefits, their usage poses some risks that are a result of the lack of supervising institutions and transparency. Because disinformation and volatility is discouraging for personal investors, cryptocurrencies emerged hand-in-hand with the proliferation of online users’ communities and forums as places to share information that can alleviate users’ mistrust. This research focuses on the study of the interplay between these cryptocurrency forums and fluctuations in cryptocurrency values. In particular, the most popular cryptocurrency Bitcoin (BTC) and a related active discussion community, Bitcointalk, are analyzed. This study shows that the activity of Bitcointalk forum keeps a direct relationship with the trend in the values of BTC, therefore analysis of this interaction would be a perfect base to support personal investments in a non-regulated market and, to confirm whether cryptocurrency forums show evidences to detect abnormal behaviors in BTC values as well as to predict or estimate these values. The experiment highlights that forum data can explain specific events in the financial field. It also underlines the relevance of quotes (regular mechanism to response a post) at periods: (1) when there is a high concentration of posts around certain topics; (2) when peaks in the BTC price are observed; and, (3) when the BTC price gradually shifts downwards and users intend to sell.

Suggested Citation

  • Ana Fernández Vilas & Rebeca P. Díaz Redondo & Daniel Couto Cancela & Alejandro Torrado Pazos, 2021. "Interplay between Cryptocurrency Transactions and Online Financial Forums," Mathematics, MDPI, vol. 9(4), pages 1-22, February.
    • Handle: RePEc:gam:jmathe:v:9:y:2021:i:4:p:411-:d:502476
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    References listed on IDEAS

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    7. Young Bin Kim & Jun Gi Kim & Wook Kim & Jae Ho Im & Tae Hyeong Kim & Shin Jin Kang & Chang Hun Kim, 2016. "Predicting Fluctuations in Cryptocurrency Transactions Based on User Comments and Replies," PLOS ONE, Public Library of Science, vol. 11(8), pages 1-17, August.
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    2. Dias, Ishanka K. & Fernando, J.M. Ruwani & Fernando, P. Narada D., 2022. "Does investor sentiment predict bitcoin return and volatility? A quantile regression approach," International Review of Financial Analysis, Elsevier, vol. 84(C).

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