A recent study conducted by the Network Contagion Research Institute (NCRI) has shed light on the significant influence of crypto-spouting Twitter bots on the price of altcoins. The study examined over 3 million tweets related to 18 altcoins listed on FTX between January 2019 and January 2023.
The Impact of Twitter Bot Activity
The research revealed that Twitter bot activity played a crucial role in amplifying the value of several cryptocurrencies, including The Sandbox (SAND), Gala (GALA), Gods Unchained (GODS), and LooksRare (LOOKS). In fact, half of the analyzed coins showed signs of price influence as a result of tweet bot activity. Interestingly, the study found that inauthentic tweets would increase after FTX posted about a specific token on social media.
Coordination and Market Manipulation
The study raised questions about the potential involvement of FTX or Alameda Research in coordinating the bot activity. With half of the FTX listed coins showing signs of forecasting subsequent price through inauthentic tweet volume, it suggests that these networks were intentionally deployed to influence changes in the market. This poses the question of whether FTX or Alameda engaged in coordinated inauthentic activity on social media to artificially inflate market values.
The study also explored the impact of Twitter bot activity in conjunction with Elon Musk’s tweets on two memecoins, Pepe (PEPE) and PSYOP. Researchers detected a surge in newly created bot accounts before the launch of PEPE, which subsequently tweeted about one of the two coins. Furthermore, Musk’s tweets containing references to each token further boosted their prices. For instance, Musk’s tweet featuring a Pepe meme caused the token’s price to surge by over 50% within 24 hours.
Implications for Stocks and Securities
While this study focused on cryptocurrencies, the researchers emphasized that similar phenomena could also affect traditional stocks and other securities. They pointed to the social media frenzy surrounding meme stocks like GameStop and AMC in 2022. Thus, it is crucial to understand the potential implications of coordinated bot activity not only in the crypto space but across various financial markets.
The study conducted by the NCRI highlights the significant role played by Twitter bots in artificially inflating the prices of altcoins. The findings shed light on the influence of inauthentic tweet volume and raise concerns about potential market manipulation by prominent players in the industry. As such, it is essential for regulators and market participants to closely monitor these activities and develop mechanisms to safeguard against potential manipulation in the cryptocurrency and traditional markets alike.