Bitcoin’s volatility is well known, therefore small price fluctuations are nothing unexpected. After gaining ground yesterday, Bitcoin slumped in the early hours of the morning. The drop appears to have been caused by news that Goldman Sachs has abandoned plans to open a bitcoin trading desk, Business Insider reported citing people familiar with the matter. Currently, Bitcoin is trading at around $7,000, which is close to the intraday low of $6,938. Earlier today, the cryptocurrency hit an intraday high of $7,387. In this way, the drop forced Bitcoin to hit the brakes on a rally that we have witnessed in the last ten days. However, the Bitcoin community is not giving up on their favorite cryptocurrency just yet. Amid the rally, the Bitcoin Subreddit (r/Bitcoin) has an increase in traffic. Today the Subreddit keeps buzzing, with many people urging to HODL and suggesting that Bitcoin will eventually recover.
Bitcoin Subreddit Is Buzzing for a Reason
The increase in traffic on the Bitcoin SubReddit was reported by its moderator BashCo on Twitter. “Visitor traffic to r/Bitcoin has been dropping every month since December 2017… UNTIL NOW. Bull market forming?” BashCo said.
— BashConaut (@BashCo_) August 29, 2018
He didn’t provide any statistics to support the statement. However, if we accessed the daily discussion thread and the r/Bitcoin Price Talk chat yesterday, we could see some excitement among users. “You just gotta love this organic growth we’ve had for the past weeks. Slowly but surely,” says one user. Others talk about the fact that the current rally is fueled by FOMO (Fear of Missing Out), which sends people buying Bitcoin and further raises the price.
However, a popular opinion on the Bitcoin Subreddit suggests that Bitcoin is more likely to rally towards the end of the year. It’s worth mentioning that this coincides with Intercontinental Exchange’s launch of a cryptocurrency platform. ICE in partnership with coffee chain Starbucks, Microsoft Corporation and Boston Consulting Group plan to launch the platform called Bakkt on November 5. In the meantime, the SEC is expected to issue its ruling regarding a cryptocurrency ETF from VanEck and Solid X. If the ruling is positive, then Bitcoin and other cryptos should see a very fast growth in a short time span.
Meanwhile, today the sentiment is less exciting. Quite a few people express frustration with the drop and suggest the involvement of some manipulation or pump-and-dump schemes. In addition, some users suggest that Bitcoin will recover and even comment that they purchased more Bitcoins on the dip.
Social Media Sentiment As an Indicator
The Bitcoin Subreddit might have more impact on the price of Bitcoin than it might seem. The social media sentiment towards stocks was the subject of several research papers. For example, Gabriele Ranco et. al, in a paper titled “The Effects of Twitter Sentiment on Stock Price Returns” argue that Twitter activity is connected to abnormal market returns.
In addition, some real-life examples support academic research. One of them is the infamous 2013 hack of the Associated Press’ Twitter account. Hackers used the account to post a fake story about an explosion at the White House. This resulted in a significant market crash. In addition, there are many cases when news about individual companies spread quickly through social media affecting their market prices.
Therefore, social media plays an important role in the price fluctuations of a security. On the one hand, it’s good that people have access to information. On the other hand, it can be dangerous because a lot of information posted online cannot be verified, FUD much? In the case of the Bitcoin SubReddit, the increase in activity and the overall positive sentiment suggests that the Bitcoin might extend its growth in the next couple of months and there are some developments that support this opinion.