Social Sentiment Indicators (SSI) have become popular analysis tools for modern-day businesses across the globe. Today, most companies leverage SSI to understand their performance and build on efficient marketing strategies. So, how do SSI work, and why are they rising in popularity amongst individuals and corporations? This article will answer both questions and give a detailed highlight of the upcoming use of SSI within the burgeoning crypto market as well.
We live in a world where social media is the fundamental means of communication, with Facebook and Twitter dominating the scene. Both platforms host millions of daily active users who leverage social media for various reasons. However, at the core, most people use social media platforms to share their views or communicate with their loved ones. Well, at least until recently, we are now seeing a paradigm shift with social media playing a significant role in the investments and marketing industry.
A recent report by the CFA institute highlights the growing influence of social media in today’s investing culture, giving examples of the Gamestop stock price surge and Elon Musk’s tweets impact on Bitcoin and Dogecoin’s prices. It is also noteworthy that the influencer marketing niche is now worth an estimated $5-10 billion dollar industry and expected to grow significantly in the next decade as companies scale their digital marketing budgets.
GameStop’s Reddit Saga. Image source: Statistica. Data- Yahoo! Finance.
How do Social Sentiment Indicators Work?
Social media platforms have become vast sources of valuable data that multiple industries can use. In addition, these fast-rising ecosystems provide the opportunity to collect feedback data which in most cases features the market sentiment towards a particular product, event or decision. As a result, innovators have come up with social sentiment indicators to aggregate social media data for businesses, corporations or individuals.
Social sentiment indicators change the narrative for investors and businesses by providing extra insights based on social media data. Before their invention, most markets relied on the fundamental analysis and price action of production to predict its future performance. This information can now be complemented by social sentiment to provide a more accurate price prediction.
Social sentiment indicators allow market stakeholders to gather data across various social media platforms. Some of the information collected may include consumer feedback, investors’ feeling towards a specific stock or the sentiment on niche markets such as crypto. In doing so, investors and businesses can be better informed to make sound decisions.
One exciting niche that is catching the eye of investors is the crypto market – an upcoming digital ecosystem with a myriad of financial services. Innovators in this space are now adding social sentiment indicators within their range of services to enable traders and investors to maximize market opportunities.
Social Sentiment Indicators in the Crypto Market
Despite its notorious volatility, the crypto market has become a popular niche for its lucrative gains. This young ecosystem features over 7,000 digital assets with a total market capitalization of $1.6 trillion as of press time. Furthermore, the growth has been tremendous within the past few years, giving rise to crypto market segments such as Decentralized Finance (DeFi) and Non-fungible Tokens (NFTs).
Nonetheless, traders and investors within the crypto market still find it hard to capitalize on the current opportunities. The shortcomings can be attributed to inefficient market analysis tools, amongst other factors. Crypto traders and investors mainly rely on fundamentals and technical indicators to make investment decisions while giving little or no attention to sentiment indicators.
The trend is now changing, with some crypto innovators integrating social sentiment indicators within their platforms. One example of such a project is the Unizen exchange, a hybrid smart exchange built to enhance deep liquidity by combining centralized and decentralized exchange elements. The Unizen hybrid infrastructure is complemented by AI-social sentiment indicators that show the sentiment of a particular crypto asset at the time of trade execution.
Unizen’s social sentiment indicators are embedded within the platform’s custom logic module. The project has partnered with LunaCrush, which powers the social sentiment indicators by providing deep learning algorithms and language processing for social sentiment aggregation. This hybrid exchange features three social sentiment indicators which include Unizen Sentiment Indicator (ZSI), Unizen Twitter Indicator (ZTI) and Unizen Smart Score (ZSS).
Notably, all of Unizen’s social sentiment indicators provide different social media sentiments about a particular digital asset. For example, the ZSI score shows the aggregate bullish sentiment around a specific crypto asset, while ZTI indicates its Twitter activity. Meanwhile, Unizen’s ZSS score is a combined metric of both ZSI and ZTI. As a result, this smart exchange is among those setting the pace for social sentiment indicators in crypto – a trend that will likely benefit traders and investors.
Value Proposition of Social Sentiment Indicators
Social sentiment indicators propose a significant value proposition to existing industries and upcoming ones like crypto. These analytical tools increase the amount of information available for decision making across the board. For instance, a new firm looking to improve its marketing strategy; can leverage social sentiment indicators to know how each market segment feels about its product. With such information, the firm can narrow down its marketing efforts into a more potential customer base.
In crypto, social sentiment indicators can show investors the market feeling towards a particular crypto asset like Bitcoin or Ether. Such indicators come in handy given the volatile nature of crypto markets and inadequate fundamental data to make accurate price predictions. Instead, crypto users can leverage social sentiment indicators to make decisions, and if lucky enough, they can front-run other players who solely rely on fundamental and technical indicators.
Social sentiment indicators will likely become more significant as social media takes centre stage in shaping an interconnected world. Going by the progress made, these indicators will be adopted by both traditional and modern firms looking to expand their market reach or improve the quality of their products. However, it may take a while before innovators and market stakeholders fully accept the value proposition of social sentiment indicators.