Elon Musk's tweets and Twitter bot spam drive Altcoin price fluctuations: Study

A groundbreaking study has shed light on the significant influence of crypto-spouting Twitter bots in artificially inflating the prices of various altcoins, surpassing previous understanding. The Network Contagion Research Institute (NCRI) conducted an extensive analysis, scrutinising over 3 million tweets related to 18 altcoins listed on FTX from 1 January, 2019, to 27 January, 2023.

The findings expose the pivotal role played by Twitter bot activity in driving up the value of altcoins such as The Sandbox, GALA, Gods Unchained (GODS), and LooksRare (LOOKS). Notably, half of the coins showed clear indications of price manipulation due to tweet bot activity.

The study points out that the frequency of inauthentic tweets surged notably after FTX posted about specific tokens on social media, raising questions about potential coordination between FTX or Alameda Research and the bot activity.

Further it said:

“In fact, for half of the FTX listed coins in the sample, inauthentic tweet volume showed signs of forecasting subsequent price. This suggests that inauthentic networks successfully and deliberately deployed to influence changes in FTX coin prices,”

NCRI

Moreover, the research revealed that inauthentic tweet volume had a predictive effect on subsequent price movements for approximately half of the FTX-listed coins in the sample. This observation strongly suggests that these inauthentic networks were strategically deployed to influence changes in FTX coin prices deliberately.

Elon Musk's tweets & memecoins: A significant influence on Altcoin prices

Elon Musk's tweets also came under scrutiny in the study, which examined their impact on two recent memecoins - Pepe (PEPE) and PSYOP. The study demonstrated how Musk's tweets, along with orchestrated bot activity, played a role in influencing the prices of these tokens.

Explaining Constitutional Amendments pic.twitter.com/oYkMPBe9Zi

— Elon Musk (@elonmusk) May 13, 2023

Notably, before the launch of PEPE, NCRI detected a surge in newly created bot accounts, all of which later tweeted about either PEPE or PSYOP. Additionally, memes played a key role in boosting the popularity of these tokens, further accentuated by Musk's apparent endorsement through his tweets.

The researchers also underscored the broader implications of this phenomenon, as it could potentially impact not only cryptocurrency markets but also traditional stocks and securities.

As observed on social media in 2022 around "meme stocks" like GameStop and AMC serves as a cautionary example, highlighting how orchestrated bot activity and influential tweets could sway market sentiment and prices.

In short, this study unravels the extensive and concerning influence of Twitter bots on altcoin prices, raising questions about market fairness and transparency.

As the cryptocurrency landscape continues to evolve, investors and regulators must remain vigilant in understanding and mitigating the impact of social media manipulation on digital asset markets.