How Social Media Affects Volatility in Crypto Markets
There’s no denying the power of digital words and images as they continue to influence the constantly changing trajectories of digital assets.
Cryptocurrency and social media are both products of technological revolutions, and they’re inextricably linked in the 2020s. Indeed, the ups and downs of crypto coin prices will sometimes depend on the ever-changing sentiment on social platforms like X (formerly known as Twitter) and YouTube.
To be sure, it’s not a phenomenon that’s limited to blockchain-based assets. Stock prices, for example, can certainly fly or plunge in the wake of a social media trend or even a single text posting or video.
Yet, in the 24/7 cryptocurrency world, asset prices can be particularly prone to wild price swings based on social media activity. Truly, when two tech worlds collide, the result can be fast crypto riches – or an equally fast crypto collapse, as the case may be.
Meme Coin Gets a Boost
Checking Binance’s list of cryptocurrency leaders by market cap daily should convince you that, on any given day, even the most stable tokens like Bitcoin and Ethereum can be quite volatile. For very low-priced meme coins, the price volatility can be magnified exponentially.
Frog cartoon-themed Pepe Coin provides a textbook example of how fast meme token prices can move – and of how an influential figure can impact cryptocurrency prices with just a tweet or two. According to Binance, PEPE price saw a massive price increase in one month from $0.000007901 on November 4th to $0.00002737 on December 9, 2024. This volatility is driven almost entirely by speculation of the overall market and factors like social media buzz.
Binance’s description makes it crystal clear that Pepe Coin is, indeed, a not-overly-serious meme token. “The PEPE coin is a meme coin built upon the legacy of Pepe the Frog, a popular internet character. The cryptocurrency draws on the lighthearted and humorous nature of the meme to create a unique and engaging digital asset,” Binance explains.
With Pepe Coin already trading at a fraction of a penny – and at a much lower daily trading volume than, say, Bitcoin or Ethereum – this frog-faced coin is already susceptible to extreme volatility. It would only take a market-moving tweet from a high-profile name, then, to get Pepe Coin to leapfrog over other tradable tokens.
Spreading the News
Of course, the connection between social media and crypto-market volatility isn’t always based on meme coin movements. In some cases, it’s due to real, material news items impacting digital assets.
A prominent example occurred when Securities and Exchange Commission (SEC) Chairman Gary Gensler announced on X that he would step down from that position as of January 20, 2025. Clearly, Gensler understood the power of social media since he chose to use X to disclose this important development.
It shouldn’t be too surprising, then, that the Bitcoin price rose on November 21, the day of Gensler’s X post, and continued to rise in the following weeks. After all, bullish Bitcoin traders relished the prospect of a new, crypto-friendly SEC chair.
Thus, social media can push cryptocurrency prices in either direction via legitimate news items, while also stoking or mitigating volatility. It’s not just about meme tokens, echo chambers, or FOMO (fear of missing out) spreading like a virus on social media.
Social Media as a Useful Gauge
Undoubtedly, bad actors can misuse social media can boost a cryptocurrency’s volatility through overstated hype or FUD (fear, uncertainty, and doubt). It works both ways, as a single social media post can spread like wildfire, prompting a wild price spike or a devastating sell-off.
With caution and due diligence, you can filter out the noise and the influencers with less-than-pure intentions. Better yet, you can leverage social media as a useful gauge of sentiment for or against a particular token, or for the crypto market as a whole.
Maybe you like to ride a short-term sentiment trend higher, or perhaps you prefer contrarian plays when the social media buzz seems too bullish or bearish. Either way, there’s no denying the power of digital words and images as they continue to influence the constantly changing trajectories of digital assets.
