Bitcoin might be the least understood story making headlines this year, but the digital currency is turning heads from the deep web to the US Senate. Whether you’re stocking up on Bitcoin, or awaiting a crash, our study reveals an interesting correlation between Bitcoin’s value and activity on social media.
Bitcoin appeared online in 2009. While a mission statement has not exactly been declared, the premise of Bitcoin is to establish a decentralized, digital currency that can be used anywhere in the world to buy things online.
Putting the bit in Bitcoin, the currency exists as computer-generated values distributed over a network of users. The number of Bitcoins which can appear on the network is ruled by an algorithm that makes their appearance more rare as the number of users increases. To put it simply, the more people using Bitcoin the rarer they become—the higher their value.
Bitcoin has matured largely under the radar and hasn’t been without controversy. Many are critical of the currency’s instability, and others voice their discomfort with Bitcoin’s appeal to anonymous trading of illicit material over the Internet. Nonetheless, Bitcoin has gained favor and popularity, adopted by businesses worldwide eager to see Bitcoin do for money what Skype has done for phone calls.
On November 18, a hearing was held by a United States Senate committee to determine the “promises and risks” Bitcoin poses to “government and society at large”, BBC reports. The hearing followed the FBI’s closure of the deep web site Silk Road, which traded in Bitcoin.
The result of the hearing was that, aside the challenges represented by Silk Road’s case and its early, speculative stage, Bitcoin offers “legitimate financial services”. The committee’s general positivity has brought Bitcoin closer to mainstream acceptance, and has changed the tone of the conversation. The currency’s value dramatically increased after the hearing, and as it turns out has had an observable—and measurable—impact on social media.
We did an internal study to evaluate the effect(s) Bitcoin’s price might have on Facebook and Twitter users. It would be natural to assume that Bitcoin’s popularity on social media would rise as its public profile does in general. However, what we’ve discovered is remarkably more interesting.
Shown in the charts below, as Bitcoin’s value rises so does the number of Facebook Fans and mentions on Twitter. In short, our data has revealed a positive correlation between the currency’s value and Fan growth on Facebook…
…and the same correlation is true for mentions on Twitter.
On Facebook, 57% of changes in Bitcoin’s Fan base can be attributed to price changes from March 11 to November 25 this year. The same relationship exists for 51% of changes in the number of Bitcoin mentions on Twitter from September 30 to November 25.
That Fan growth and Twitter mentions can be positively correlated with Bitcoin’s price suggests that social media analytics can offer insight on speculations in Bitcoin’s value. For instance, as we’ve seen on Facebook and Twitter, social media activity can be said to indicate positive changes in Bitcoin’s price.
In the near future, we’d like to assess what relationship might exist between social media behavior and Bitcoin price deflation. We’ll follow up right here, so stay tuned.