New research shows a simple strategy of tracking sentiment on social media like Twitter, about specific tokens and projects that could have proven a profitable venture for traders.
DeFi token movements predicted
According to DappRadar, social media can be a “powerful tool” for predicting token price movements, mainly as DeFi space has remained heavily driven by retail hype.
The firm has used a decency method to map DeFi token prices against Bitcoin, together with weighing them with social volumes, the followers of Twitter changes and also the active wallets.
In the case of decentralized lending provider Aave (LEND), Dappradar ran reversion analytics using the four metrics. The findings include massive 75.9% of LEND price fluctuation and have majorly jammed by the two metrics — Twitter followers and Aave active wallets.
The firm has found a similar result on Stablecoin lender Curve, and the CRV token nosedived recently by over 84% compared to its all-time high. The price currently hovers at $2.
It added Curve’s Twitter follower changes and active wallets displayed the strongest association of 86.4% and 84.7% respectively with each other. The firm further explained:
For the meantime, MKR, the governance token of MakerDAO, was obstructed more by Bitcoin price and Twitter follower change, as contrasting to the rise in active wallets having an impact on MKR prices.
Do Twitter followers affect the price?
Therefore, the firm said that the account Bitcoin prices affecting altcoin prices continue to hold. Yet, active wallets and the increase in Twitter users serve a better association for the costs of some DeFi altcoins such as LEND and CRV.
But, the firm did point out some boundaries that existed in the calculations, such as the tests being directed on only three DeFi tokens and those social media sentiments were taken only from Twitter, with sites like Reddit not involved.
But still, it’s alpha for those who challenge.