XRP Price and Volume Linked to Twitter Activity, New Data Reveals
Data shows that since 2018 tweets mentioning XRP have influenced trading volume and the correlation has become stronger in 2020.
XRP gains from the month of February were erased over the past two weeks as the altcoin returned to its late January price at $0.23 today. The majority of the losses appear to be caused by the massive correction in traditional markets, which caused a sharp downturn for Bitcoin and many altcoins.
As reported by Cointelegraph, analysts now view the correction as a major setback, raising doubts about the future of the long-awaited bull market.
Cryptocurrency market daily overview. Source: Coin360
XRP is one of the most frequently mentioned cryptocurrencies on social media platforms, especially, Twitter. As discussed in the previous analysis, there is a relationship between the number of daily tweets mentioning Bitcoin’s (BTC) and it’s trading volume. This leaves the door open to discuss if the high number of XRP mentions on social media also influenced its volume or returns.
Relationship between tweets and XRP price since 2018?
The number of tweets mentioning XRP has been relatively consistent over time with its yearly averages since 2018 is similar. In 2018, the average number of daily tweets mentioning XRP was 5,937 daily average tweets. While, in 2019, the average daily number of tweets reduced slightly to 5,364 tweets. However, January this year had a smaller average number of tweets (5,001 tweets) with a spike — 6,919 tweets — on Jan. 6, the day XRP price gained more than 12%.
Recently, the average number of tweets observed during February has increased to 6,429 daily tweets, a much higher average than the ones seen in earlier periods.
The number of daily tweets from January 2018 until February 2020.
Following the trend of having a higher average in February, the correlation between the number of daily tweets and XRP prices in 2020 has been the highest since 2018 at 62%. Moreover, the correlation between these 2 variables this month has similar values at 60%, much higher than in January (12%).
However, this relationship has been much lower in previous years: In 2018, the correlation between the number of tweets and XRP price was set at 35%, while in 2019, it shows almost no correlation – 7%.
A correlation of 0% means that XRP returns and the number of tweets is not related in any way. A correlation of 100% means that XRP and the number of tweets move completely in the same direction, while -100% correlation means they are inversely related.
A small positive influence on returns
The inconclusive trend seen in the correlations leads us to employ other analyses where we find a small significant relationship between the daily number of tweets and XRP returns. In 2019, when the number of daily tweets increased by 1%, the XRP return on the same day increased by 0.032%. However, in 2018, no significant relationship is present.
A slightly higher influence is observed in the first month and a half of 2020 — when the daily number of tweets would increase by 1%, XRP returns would increase by 0.059%.
XRP daily price from Jan.1, 2020 until Feb.18, 2020.
This stronger relationship between XRP mentions in tweets and trading volume was also reflected in the higher correlations seen in 2020 when compared to other years. However, when looking at the influence of today’s number of tweets and XRP returns tomorrow, we do not find a significant relationship, meaning, tweets can’t predict future returns.
The number of daily tweets from Jan.1, 2020 until Feb.18, 2020.
A stronger relationship between tweets and volume
When it comes to the relationship between the number of tweets and XRP daily volume, a much higher influence is detected. Any of the years analyzed (2018, 2019, 2020) shows a significant relationship between these variables. The strongest influence happens, once more, at the start of 2020 — when the number of daily tweets would increase by 1%, XRP’s volume would increase by 1.215% the same day. This relationship is slightly lower in 2019 (0.916%) and in 2018 (0.926%).
What’s more, the relationship between the number of daily tweets today and XRP’s volume tomorrow is also significant across the years, even though it’s slightly lower than the values observed for the same day effect.
Once more, 2020 sees the strongest relationship — when the number of daily tweets would increase by 1%, XRP’s volume tomorrow would increase by 0.972%. During 2018 and 2019, this relation is set at 0.741% and 0.871%, respectively.
XRP versus Bitcoin: 2020 outlook
XRP and Bitcoin have been compared regarding other features like the correlation of both currencies to gold. The start of 2020 has seen a shift in the ”digital gold” narrative with XRP price having a stronger correlation to gold than Bitcoin.
As published by Cointelegraph, the daily number of tweets mentioning Bitcoin influenced its daily volume whether on the same day or the next day. However, when establishing the same parallel, in the case of XRP, a stronger relationship is found regarding returns in 2019 and 2020, while having comparable significant results for the influence of tweets in XRP volume.
Looking forward, investors should be aware of the consistency of these relationships as the year moves forward and pay attention to social metrics in the case of XRP.
Data for the number of tweets drawn from bitinfocharts.com. The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.