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Mutual-Excitation of Cryptocurrency Market Returns and Social Media Topics
Cryptocurrencies have recently experienced a new wave of price volatility and
interest; activity within social media communities relating to cryptocurrencies
has increased significantly. There is currently limited documented knowledge of
factors which could indicate future price movements. This paper aims to
decipher relationships between cryptocurrency price changes and topic
discussion on social media to provide, among other things, an understanding of
which topics are indicative of future price movements. To achieve this a
well-known dynamic topic modelling approach is applied to social media
communication to retrieve information about the temporal occurrence of various
topics. A Hawkes model is then applied to find interactions between topics and
cryptocurrency prices. The results show particular topics tend to precede
certain types of price movements, for example the discussion of 'risk and
investment vs trading' being indicative of price falls, the discussion of
'substantial price movements' being indicative of volatility, and the
discussion of 'fundamental cryptocurrency value' by technical communities being
indicative of price rises. The knowledge of topic relationships gained here
could be built into a real-time system, providing trading or alerting signals.Comment: 3rd International Conference on Knowledge Engineering and
Applications (ICKEA 2018) - Moscow, Russia (June 25-27 2018
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