|
This article tracks the hype and price action of several of everyone’s favorite cryptocurrencies.
Cryptocurrency enthusiasts tend to defend their favorite crypto assets. Just look at the supporters of XRP and LINK. Does the hype on Twitter match the high trading activity? The performance of some altcoins in 2020 was mixed. Cointelegraph studied the hype activity ratio indicator between assets and prices by analyzing information from cryptocurrency data platform The Tie.
“The hype activity ratio metric measures the volume of tweets per $1 million of trading volume per coin,” Joshua Frank, CEO and co-founder of The Tie, told Cointelegraph. He added:
“As of August 15, 2019, the average hype-to-activity ratio for cryptocurrencies was 1.02. In other words, the average number of tweets for every $1 million in trading volume for a cryptocurrency was 1.02.”
At any given time, there is often a lot of discussion on Twitter about various assets, as well as announcements and other activity. Sometimes trading activity and hype go hand in hand, while other times the two are out of balance.
“A high hype-activity ratio may indicate that a particular cryptocurrency is overhyped on social media relative to its trading volume,” Frank explained. “This is a good metric for identifying outliers or tracking how hype a particular coin is relative to its trading volume over time.”
In 2019, The Tie conducted an in-depth study of this situation. The Tie’s findings ranged from relatively normal situations, such as Tether (USDT) trading volume being higher than the discussion about it, to abnormal situations, such as Electroneum (ETN) hype activity ratio being so high that The Tie suspected it was using shady means.
Cryptocurrency prices performed well in 2020, with Bitcoin (BTC) performing the best, breaking its all-time high in 2017. In recent years, ETH, XRP, and LINK have also performed well, and there have been many promotions about them on Twitter, but do their prices match their hype?
ETH
In 2020, the crypto industry's second-largest cryptocurrency, ETH, has provided the public with a lot to discuss. The progress of Ethereum 2.0 and the transition of the Ethereum blockchain to a proof-of-stake mining algorithm were highly anticipated, but both took longer than expected to complete. On November 24, 2020, ETH2.0 met the requirements required for the launch of the beacon chain on December 1, completing Phase 0 and going live on December 1.
In 2020, the hype of ETH on Twitter has fluctuated significantly relative to its price. At the beginning of 2020, the hype of ETH moved closer to the price.
The COVID-19 outbreak, which caused the market crash in March, provided a strong external shock to the market, causing crypto prices to plummet even as hype remained stable. Between late April and early June, hype levels were largely in line with price action.
Throughout June and July, ETH’s popularity on Twitter began to rise as the “Summer of DeFi” unfolded. Between June 1 and July 20, ETH’s Hype Activity Ratio had risen from 0.395 to 1.019, with ETH’s price remaining flat and trading activity occurring close to the $221-$247 range. The strong rise in ETH’s price at the end of July changed this divergence, with ETH’s price reaching $383 on August 1 and its Hype Activity Ratio remaining at 1.003. On the other hand, ETH’s hype also flattened out during November and December, despite its price being close to the 2017 bull run high.
During this period of June and July, ETH's reported transaction volume dropped significantly, while the number of tweets increased. On June 2, ETH's transaction volume reached $13.86 billion, which is consistent with its hype activity ratio of 0.406. As of July 20, ETH's transaction volume dropped to $5.59 billion, but its number of tweets per 1 million transaction volume more than doubled, and its hype activity ratio reached 1.019 on the same day.
The price of ETH has surged in recent days, but its hype has not been accompanied by the same boom. XRP
XRP, the third-largest crypto asset by market cap, hasn’t seen the same major news events as Ethereum, despite a steady stream of hype from a loyal group of fans known as the “XRP Army.”
In January, Ripple’s CEO commented on a possible IPO for the company. Other news stories about XRP throughout the year included: one of Ripple’s co-founders selling some of his XRP holdings, progress in the SEC lawsuit alleging XRP is an unregistered security, and Flare Networks’ plans to build a cross-chain bridge between the Ethereum and XRP networks, which also involved an upcoming SPARK token airdrop.
Looking at XRP’s Twitter hype and price action in 2020, XRP’s hype-activity ratio remained high for most of the time. Similar to ETH, during the COVID-19-induced price drop, XRP’s price fell far more than its Twitter activity. Similar to ETH, XRP’s hype activity ratio increased between May 11 and July 21, but it was not until early August that XRP’s price saw the same gains as ETH, after recovering most of its losses. However, XRP’s hype activity ratio was much higher than ETH’s overall during this period, rising from 1.414 to 2.754.
On September 20, XRP’s hype activity ratio began to trend downward, dropping from 2.249 to 0.59 on December 2. Meanwhile, the price of XRP fluctuated sideways between $0.22 and $0.25 between September 20 and November 2. But throughout November, XRP’s price surged, reaching $0.69 despite a declining hype activity ratio.
On December 22, the SEC filed a lawsuit against Ripple, claiming that Ripple was selling unregistered securities and that XRP had been classified as a security for many years since its launch. In the days after the SEC announced its lawsuit against Ripple, the price of XRP plummeted. Many exchanges have cancelled XRP trading, and the price of XRP has fallen to match its Twitter activity, which had been lagging behind its price before the news was released.
LINK
LINK also has a similar support group as XRP, known as the “Link Navy”. During the period when LINK skyrocketed, Barstool Sports founder Dave Portnoy called the members of the “Link Navy” scammers.
As a well-known crypto asset in the crypto industry, LINK's price has performed well in 2020. Data from TradingView shows that LINK reached an all-time high of nearly $20 in August. From the lows in March and the all-time highs in August, the price of LINK rose from about $1.5 to $20.
News coverage surrounding LINK in 2020 includes: Chainlink announcing partnerships with multiple companies, multiple networks announcing the integration of Chainlink oracles, and an influx of its skeptics. At the beginning of 2020, LINK showed a fairly high hype activity ratio, reaching 5.128 on January 25, but its price was well below $2.46. After that, the LINK hype activity ratio dropped all the way, and by April 11 it had dropped to 2.099, which was consistent with its price of $3.25.
Although LINK's Twitter activity was not close to its price for a long time, it quickly rebounded with a strong upward trend, reaching a hype activity ratio of 4.456 as of June 7. However, from April 11 to July 6, LINK's price fluctuated between $3.17 and $5.30, fluctuating quite slowly during the Twitter activity period. LINK's price then began to rise, eventually rising to $20, catching up with Twitter activity to some extent.
During the strong run-up, LINK’s Hype Activity Ratio actually turned negative long before it approached its all-time high of $20. By October 9, it had plummeted all the way to 1.199. LINK’s price has fallen significantly from its all-time high of $20, but it remains at a fairly respectable level compared to its Hype Activity Ratio. LINK has received more attention on Twitter than ETH in 2020, and even significantly more than XRP.
ETH, XRP, and LINK all saw declining or flat Twitter hype in the last few months of 2020. This decline and stagnation may be due to Bitcoin's dramatic surge during that time. BTC was particularly notable in the last three months of 2020, rising from $10,500 to $19,900, driving the prices of certain altcoins higher, but without attracting much attention.
DeFi
Riding on the decentralized finance (DeFi) craze of 2020, some DeFi assets also saw dramatic price swings in the first few years of their existence.
Yearn.finance’s token, YFI, was launched in the second half of 2020 and its price soared from $900 to over $40,000.
Despite the absence of any hype in the previous months, the hype in November and December exceeded its price, with YFI's hype-activity ratio peaking at 0.92 at the $25,708 price level, but significantly lower than the levels of XRP and LINK. DeFi protocol SushiSwap and its token SUSHI had a major impact in September. SushiSwap's anonymous head "Chef Nomi" took away part of the project development funds and temporarily handed over control of the protocol to FTX exchange CEO Sam Bankman-Fried. Chef Nomi later returned the funds.
During the second half of October and the first half of November, SUSHI’s hype far exceeded its price, with its hype-activity ratio peaking at 1.89, an index comparable to Ripple but lower than LINK, when SUSHI’s price was $0.71. Looking back at 2020, and the ratio of hype activity in line with asset prices, we can see that Twitter hype is still prevalent in the crypto industry. If the Bitcoin bull run continues, how will the various data of the crypto industry appear in 2021? (Cointelegraph) |
