Brokerage company eToro has launched a new tool that is supposed to assist investors crack the code of investing in cryptocurrencies as bitcoin.
In a recent blog, the firm announced that it is partnering with crypto information service provider TIE, which utilizes algorithms based on crowd-driven sentiment to develop trading strategies.
Twitter can help you make money in bitcoin and crypto
eToro points out that TheTIE-LongOnly CopyPortfolio will start trades on the basis of positive Twitter sentiment. The machine learning powered algorithm will analyze more than 850 million tweets each day to measure crypto and bitcoin sentiment.
In addition, eToro states that the cryptocurrency Twitter-based trading strategies have resulted to returns of 281% after fees in the last two years. The yearly return of the trading strategy is 123%, which surpasses the 29% return delivered by an equally-weighted basket of identical underlying cryptocurrency assets.
eToro says that the algorithm has also defeated bitcoin;s 41% return over the last two years. Therefore, the premise of the Twitter-based investment strategy appears promising given the track record over the last few years. But what is behind the success of this strategy so far?
Sentiment-driven investing might be the key to unlocking cryptocurrency
Cryptocurrencies like bitcoin are fairly new. As a result, the whole world appears confused about the characteristics of bitcoin and other crypto, which was initially developed to be a way of P2P electronic cash system for making online payments.
However, the general public has brought about store of value and renowned investors have even equated bitcoin to gold. This shows that the basics of crypto are still in their budding stages, and people don’t have much knowledge as to what’s pushing the price of bitcoin.
So far, it has been thought that strong institutional demand will heighten the price of bitcoin and other crypto, but the recent crash in the price appears to indicate otherwise.
Some people think that bitcoin is a hedge against macroeconomic uncertainty, however, that argument appears to be losing ground in light of the recent price behavior and the turbulent U.S –China trade war.
That is why analysts at eToro have concluded that bitcoin and other crypto are being pushed by sentiment and perception, since they don’t have any set fundamentals just yet.
Due to the same, eToro has brought a new tool to the market that will help investors’ measure sentiment in bitcoin and other cryptocurrencies. Guy Hirsch, the U.S managing director at eToro, states:
“In traditional markets, retail investors have historically lagged behind the ‘smart money’ when it comes to the data and tools available to them. This puts individual investors at a major disadvantage. In the spirit of crypto and decentralized technology, we believe that offering institutional-grade tools to every investor will level the playing field and democratize investing.”
The past performance advertised by eToro shows that the strategy of gauging Twitter sentiment while investment investing in cryptocurrencies could be giving returns. However, investors need to be careful and conduct their own due diligence before embarking on such investing tool that promises huge returns.