In the world of cryptocurrencies, the influence of social media on price movements is well-known. However, a recent study conducted by the Network Contagion Research Institute (NCRI) suggests that Twitter bots may have a much larger role in artificially inflating the price of altcoins than previously understood. The study analyzed over 3 million tweets involving 18 altcoins posted from January 1, 2019, to January 27, 2023, and found significant correlations between bot activity and the value of cryptocurrencies.
The study revealed that Twitter bots played a crucial role in amplifying the value of certain altcoins listed on FTX, such as The Sandbox (SAND), Gala (GALA), Gods Unchained (GODS), and LooksRare (LOOKS). Approximately half of the coins analyzed showed signs of price influence as a result of tweet bot activity. This raises concerns about the potential coordination between FTX, Alameda Research, and the bot activity. The study questioned whether FTX or Alameda engaged in coordinated inauthentic activity on social media to artificially inflate market values.
Furthermore, the research found that inauthentic tweet volume increased after FTX posted about the token on social media. This suggests that there is a deliberate deployment of inauthentic networks with the intention of influencing changes in FTX coin prices. The study found that, in some cases, the volume of inauthentic tweets even acted as a predictor of subsequent price movements.
The study also investigated the impact of Twitter bot activity and Elon Musk’s tweets on two memecoins, Pepe (PEPE) and PSYOP. It detected a surge in newly created bot accounts just before the launch of Pepe, and these accounts went on to tweet about either of the two coins. Additionally, Musk’s tweets played a significant role in influencing the prices of these memecoins. For example, Musk’s May 13 tweet featuring a Pepe meme caused the token’s price to jump over 50% within 24 hours.
The study highlighted the coordinated effort to use bots to amplify the popularity of Pepe. Account creation surges were observed a day prior to Pepe’s April 17 launch, indicating a deliberate orchestration of bot activity. This phenomenon suggests that not only altcoins but also memecoins are susceptible to manipulation through social media.
The NCRI researchers also stressed that this phenomenon is not limited to cryptocurrencies but could potentially impact stocks and other securities as well. They pointed to the social media frenzy in 2022 surrounding “meme stocks” like GameStop and AMC. The power of social media in influencing financial markets is undeniable, and the use of bots to manipulate sentiment and prices raises concerns about market integrity and investor trust.
The study conducted by the NCRI sheds light on the significant influence of Twitter bots in artificially inflating the prices of altcoins and memecoins. It raises important questions about the role of major cryptocurrency exchanges and research firms in coordinating such bot activity. Moreover, it underscores the need for increased regulation and transparency in the cryptocurrency market. As social media continues to play a vital role in shaping market sentiment, it is crucial for investors to exercise caution and conduct thorough research to make informed decisions.