Social media activity can be a powerful tool for predicting token price movements
According to the DappRadar DeFi page, TVL activity witnessed a downturn at the beginning of September. The reason behind this was due to an overall decrease in the price of the DeFi tokens within the ecosystem.
Usually, Bitcoin is seen as the major indicator of price moves for Altcoins but DeFi tokens often deviate away from Bitcoin prices.
As the DeFi space is so hype-driven, social media activity is going to be considered together with daily active wallets. In this report we will be running correlation and regression analysis on the metrics listed below:
- Token Price vs Bitcoin price
- Token Price vs Twitter followers change (24h)
- Token Price vs Social volumes
- Token Price vs Aave dapp active wallets
In this case, social volumes represent the number of mentions of the coin on 1000+ crypto social media channels. It also includes Telegram groups, crypto subreddits, discord groups, private traders chats, and more.
Twitter follower data and social volumes were collected from Santiment.
Key Findings
- While Bitcoin proves to be correlating to the price of LEND, Twitter follower and Aave active wallet activity have the strongest correlation.
- MKR price variation is strongly influenced by the price of Bitcoin and the number of Twitter followers.
- Twitter follower change is the most important metric to help understand and predict CRV price movements.
- This analysis proves that social media activity can be a powerful tool for understanding and predicting price movements in DeFi.
Aave (LEND)
The token price skyrocketed by 952% within three months
The LEND token faced an all-time high value in August. Surpassing $0.8 and growing 952% from the beginning of June.
In order to understand the reasons behind the increase, we ran the correlation and regression analysis.
Twitter followers change has the biggest impact on token price
After running the correlation and regression analysis on the provided metrics, we observe that all four metrics have a positive correlation to Aave’s (LEND) price. While one metric’s correlations are way stronger than the others.
Twitter followers together with active wallet changes have the strongest correlation 75.5% and 73.3% accordingly. After running the regression analysis, it could be confirmed that Twitter and active wallets also have the strongest impact on the token price too.
While Bitcoin also shows strong results on correlation and regression, the connection is comparatively weaker.
While running the regression analysis for Twitter followers and active wallets, the results were impressive. Indicating that 75.9% of LEND price fluctuation is majorly impacted by the two metrics.
This shows that Twitter followers together with active wallet changes can to a degree explain the price movements of LEND.
To conclude, while Bitcoin proves to be correlating to the price of LEND, Twitter follower and Aave active wallets have the strongest correlation.
MakerDAO (MKR)
Token price decreased by 27% in September 2020
MKR is the ERC20 token of MakerDAO it’s also a Governance token and the primary purpose is to support the stability of MakerDAO’s DAI token.
While analyzing the price of MKR, we observe the token price experienced ups and downs in August. However, in the initial days of September, we can see the price is declining and to-date it has decreased by 27% compared to August 31st.
Bitcoin price and Twitter follower change has the strongest impact on token price
By conducting correlation and regression analysis on MakerDAO (MKR) for the four metrics mentioned above, it has been observed that two metrics have a positive correlation to the price.
Bitcoin price and Twitter follower numbers seem to have a strong relationship with the price deviations. Regression analysis confirms the idea that these metrics have a strong impact.
To conclude, MKR price variation is strongly influenced by the price of Bitcoin and the number of Twitter followers.
Curve (CRV)
CRV token nosedived recently by 84%
The CRV token as a governance token began to be distributed on the 14th of August 2020. Since that time the value has decreased by 84%. The token price has been quite stable for the last ten days and is hovering at around $2.
Twitter follower numbers are the number one metric to watch
Similarly to Aave, we can observe the same trends of correlation and regression analysis in Curve on the provided metrics. All four metrics have a positive correlation to CRV price.
Twitter follower changes and active wallets have the strongest correlation of 86.4% and 84.7% respectively.
Regardless of correlation results, the regression analysis result shows that Twitter follower changes alone have a stronger impact on price.
While running regression analysis for the Twitter followers and Active wallets, the results were exceptional, indicating that 80% of CRV price is majorly impacted by these two metrics.
To conclude, Twitter follower change is the most important metric to help understand and predict CRV price movements.
Conclusions
The idea of Bitcoin price explaining the altcoin price moves was tested on TOP DeFi tokens. It proves to be true just for MKR and LEND. While there are more important metrics, especially when it comes to LEND and CRV tokens.
Twitter followers change and active wallets proved to have the strongest impact on both Aave (LEND) and Curve (CRV) prices.
To conclude, the analysis proves social media, to be a possibly powerful tool for understanding and predicting price movements in the industry.
Data sources and limitations
- Correlation and regression analysis were undertaken.
- Only three DeFi tokens were considered.
- Only Twitter follower numbers were considered as it represents the biggest social network.
- Twitter’s follower number was collected from https://santiment.net/
Newsletter
