Cryptocurrency Price Prediction Using Tweet Volumes and Sentiment Analysis

In this paper, we present a method for predicting changes in Bitcoin and Ethereum prices utilizing Twitter data and Google Trends data. Bitcoin and Ethereum, the two largest cryptocurrencies in terms of market capitalization represent over $160 billion dollars in combined value. However, both Bitcoin and Ethereum have experienced significant price swings on both daily and long term valuations. Twitter is increasingly used as a news source influencing purchase decisions by informing users of the currency and its increasing popularity. As a result, quickly understanding the impact of tweets on price direction can provide a purchasing and selling advantage to a cryptocurrency user or a trader. By analyzing tweets, we found that tweet volume, rather than tweet sentiment (which is invariably overall positive regardless of price direction), is a predictor of price direction. By utilizing a linear model that takes as input tweets and Google Trends data, we were able to accurately predict the direction of price changes. By utilizing this model, a person is able to make better informed purchase and selling decisions related to Bitcoin and Ethereum.

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