The Role of Social Media in Influencing the Rise of Cryptocurrency vs Stocks
In May 2021, Elon Musk left a cryptic tweet where he referred to Dogecoin as his “favorite” currency and termed it the “people’s crypto.” On Twitter, he simply stated, “The Dogefather SNL May 8.” These are references to his regular tweets about Dogecoin, which he describes as “intended to be a joke.” Following this tweet from Musk, the price of Dogecoin soared by over 5000%, which helped many people get rich overnight.
In the last couple of years, there has been a lot of talk about cryptocurrency. Suddenly, everyone is interested to know more about crypto, particularly Bitcoin and Ethereum. The relationship between bitcoin and social media has played a vital role in cryptocurrencies’ development, popularisation, and potential value.
In this article, we’ll examine why and how social media performs a significant role in the rise of cryptocurrency vs stocks and how different branches of social media are responsible for much of crypto’s newfound popularity.
The advent of cryptocurrencies
So, how did the rise of crypto really take place? A person or an organisation with the pseudonym Satoshi Nakamoto invented Bitcoin (the first and the most important cryptocurrency). Several attempts to create a digital cash system were made in the 1990s, but none succeeded. In 2008, Nakamoto published a paper explaining the ways in which Bitcoin could function as a decentralised digital currency. This included concepts such as a supply determined by mining new coins and the secure blockchain, which are still hot topics in crypto today.
How do cryptocurrencies make use of social media?
Educating potential buyers
Blockchain and cryptocurrencies are complex concepts to grasp. As a result, the biggest challenge before cryptocurrencies and blockchain technology is educating new buyers. Consider Ripple, a blockchain for international payments. They undertake educational webinars among their Twitter followers from time to time to keep the audience updated about the latest developments. They have even established a TV show with nearly a million followers.
Some sections of the society have plenty of crypto enthusiasts. As a result, numerous new currencies are launching chat rooms, Slack channels, subreddits, forums, and other platforms to keep their audiences updated and active. They regularly promote these groups and communities on social media and encourage individuals to join. Social media also uses the coolness factor associated with cryptocurrencies vs stock markets to promote it.
How do social media speculations affect cryptocurrencies?
A social media platform helps determine and ascertain the public sentiment about the demand or need for Bitcoin and other cryptocurrencies. Basic economics states that high demand raises prices. As a result, the value of cryptocurrencies fluctuates whenever there is a surge in media interest.
Prices of a cryptocurrency may rise as a result of a positive broadcast and fall as a result of a negative stream. This is not the case with the stock market, which has highly regulated stock trading platforms, stockbroker activity, and online demat accounts, making it a relatively stable trading system. Similarly, when funds release new information, such as the Bitcoin network’s announcement of a lightning app, prices may rise as word spreads about the service.
This is just a glimpse of how social media has influenced the rise in popularity of cryptocurrency vs stocks. In reality, if there was no media coverage and social networking, the Bitcoin bubble could have materialised in early 2022. This is because most people had no idea what cryptocurrency was before reading about it online, in a newspaper, or watching it on their newsfeeds.