According to media giant Thomson Reuters, they most certainly do. This is why the multinational mass media firm has expanded its sentiment data offerings to track the top 100 cryptocurrencies (by Market Cap via CoinMarketCap) through its partnership with MarketPsych Data LLC, a market leader in quantitative behavioral science.
Thomson Reuters new MarketPsych Indices (TRMI) package uses machine learning and natural language processing to measure a number of emotional and topical items across news and social media sites that may drive participant behavior in cryptocurrency markets. Following the successful launch of Bitcoin sentiment data in March 2018, Thomson Reuters has created a dedicated “TRMI Cryptocurrency Sentiment package” (TRMI 3.1) that monitors more than 2,000 global news and 800 social media sites in real-time, yielding 43 themes and sentiments on the top 100 cryptocurrencies. Historical data dates back to 2009. “Sentiment analysis is used to identify turning points in markets,” said Eric Fischkin, Proposition Director of Machine Readable News for Thomson Reuters. “However, when we see that Bitcoin is trending, people don’t always pick up on that. Now our clients can understand when this is happening and ride the trend up.”
Moreover, to help identify the predictive value in this data, Thomson Reuter’s new cryptocurrency sentiment package is accompanied by visualization tools and a suite of quantitative research results developed by MarketPsych. This includes regression and cross-sectional rotation models to help traders identify influential themes and develop actionable strategies.
Cryptocurrencies Gain Mainstream Adoption
The launch of Thomson Reuters TRMI Cryptocurrency Sentiment package comes at an opportune time, as cryptocurrencies are beginning to gain mainstream adoption. According to a Thomson Reuters survey released in April 2018, approximately 20% of financial firms indicated they are considering trading cryptocurrency over the next 3-12 months.
The Thomson Reuters cryptocurrency survey revealed a shift in the market, with cryptocurrencies gaining some mainstream acceptance and financial institutions looking to start trading them over the coming months, said Pradeep Menon, Managing Director and Global Head of Investing and Advisory at Thomson Reuters. Adding a cryptocurrency-focused sentiment feed to our suite of cross-asset solutions has therefore enabled us to provide our customers with invaluable insights that may help them make strategic investment decisions.
However, in comparison to traditional financial services assets, providing trading insight to the cryptocurrency market is unique since online communications and information flow are significant drivers of cryptocurrency values. Therefore, sentiment analysis of this market often requires understanding of the top cryptocurrencies at any given time. This means where individuals get their information, which digital platforms are used for communication, and how specific language or terms used may signify future trends (for example: FOMO, HODL, etc.).
Media coverage also plays an important role in sentiment analysis of the cryptocurrency market. For instance, in terms of emotional sentiment, Thomson Reuters and MarketPsych performed quantitative research based on the top 10 cryptocurrencies being discussed in the media during a given week. Findings show that positive references to “code sentiment” results in higher returns for investors.
We look at the top 10 cryptocurrencies being discussed in the media during a given week and rate them using our code sentiment index, which shows that amount of positive references to a code underlying a token versus the negative references, explained Dr. Richard Peterson, CEO of MarketPsych. If investors buy the 2 coins with the most positive code sentiment out of the top 10 coins every week and hold them, they will see a much higher return than normal. For example, if an investor bought Bitcoin in January 2017 and held it till May 1, they would have about a 9-fold return, or an $8,000 gain. But if an investor held a token based on positive code sentiment, they would likely see a two-hundred times return. Simply put, we are able to pull out what the market is reacting to. So if the market is talking about how great the code of a token is, it will drive the market price up. In this case, it is a 9-times return for Bitcoin versus a two-hundred times return.
Moreover, media coverage for cryptocurrencies is at an all-time high. According to Thomson Reuters Starmine team, Bitcoin has received roughly as much total media coverage as Apple between January 2016 and April 2018 (according to sources scored by MarketPsych Indices).