The presence of Twitter bots in the cryptocurrency space can indeed have a significant impact on marketing strategies and investor perceptions. While social media engagement, including likes, retweets, and discussions, is often seen as a measure of a cryptocurrency’s popularity, the influence of Twitter bots can skew these metrics and mislead investors.
Research has shown that Twitter bots constitute a substantial portion of active Twitter users, ranging from 9% to 15%. These automated accounts can create an illusion of widespread excitement around a cryptocurrency, similar to pump-and-dump schemes. As a result, the engagement coefficients for these cryptocurrencies may be artificially inflated, leading to misguided investment decisions.
Cryptocurrencies with extremely high engagement coefficients, potentially indicating bot interference, have been found to yield lower returns. For example, a cryptocurrency called Krypto experienced significant returns initially but then suffered a sharp decline. The engagement coefficient for Krypto was much higher than other cryptocurrencies, suggesting possible bot manipulation.
Using tools like Botometer, which calculates the probability of a Twitter account being a bot, researchers have found that higher mean bot probabilities are associated with lower-performance cryptocurrencies. For instance, Latte, a DeFi cryptocurrency, had the highest mean bot probability and experienced a 95% price decrease within three months.
Investors should exercise caution when a cryptocurrency has an engagement coefficient exceeding 10^(-3), as it may indicate manipulation. While short-term investment strategies based on social media engagement coefficients can yield high returns, this approach may not be optimal for long-term growth. Returns over the span of a year have been negative for investments, regardless of the engagement coefficient threshold.
From a marketing perspective, it is crucial to be vigilant and understand that not all engagement on social media is beneficial. Relying solely on social media metrics can harm the credibility of a cryptocurrency’s marketing efforts if it is revealed that the apparent popularity is driven by bots rather than genuine interest. It is recommended to adopt a balanced marketing approach that includes social media engagement but also focuses on building a genuine human interest, loyal community, and real activity around the cryptocurrency.
In summary, while social media, particularly Twitter, plays a vital role in cryptocurrency promotion, the presence of Twitter bots can distort engagement metrics and mislead investors. Crypto marketers should be aware of this phenomenon and strive for a balanced marketing strategy that goes beyond social media engagement alone.