Down with the #Dogefather: Evidence of a Cryptocurrency Responding in Real Time to a Crypto-Tastemaker

Michael Cary

doi:10.3390/jtaer16060123

Abstract

Recent research in cryptocurrencies has considered the effects of the behavior of individuals on the price of cryptocurrencies through actions such as social media usage. However, some celebrities have gone as far as affixing their celebrity to a specific cryptocurrency, becoming a crypto-tastemaker. One such example occurred in April 2021 when Elon Musk claimed via Twitter that “SpaceX is going to put a literal Dogecoin on the literal moon”. He later called himself the “Dogefather” as he announced that he would be hosting Saturday Night Live (SNL) on 8 May 2021. By performing sentiment analysis on relevant tweets during the time he was hosting SNL, evidence is found that negative perceptions of Musk’s performance led to a decline in the price of Dogecoin, which dropped 23.4% during the time Musk was on air. This shows that cryptocurrencies are affected in real time by the behaviors of crypto-tastemakers.

Highlights

While some users are concerned with price dynamics, others are concerned with the popularity of the cryptocurrency [1]
The vector autoregression (VAR) results indicate that increases in the magnitude of negative public perception of Musk’s performance had a negative effect on the price of Dogecoin
Trades began to be finalized in earnest approximately five minutes after an event occurred that led to an increase in negative sentiment, and this behavior continued until the cumulative effect of these sales led to a statistically significant decrease in the price of Dogecoin, occurring approximately at the 12 min mark. These results indicate that investors/users of cryptocurrencies who are interested in the popularity of the cryptocurrency are influenced by the actions of crypto-tastemakers, but that crypto-tastemakers, once thoroughly affixed to a specific cryptocurrency, may only be able to harm the popularity of the coin

Summary

Introduction

Res. 2021, 16, The number of cryptocurrencies has grown rapidly over the past decade. With such diversity, choosing a specific cryptocurrency to use can be a daunting task, especially for more casual cryptocurrency users. While some users are concerned with price dynamics, others are concerned with the popularity of the cryptocurrency [1]. Herding behavior in cryptocurrency markets has become a well documented phenomenon in the literature [2], and even cryptocurrencies such as Bitcoin are traded at least in part due to emotional cues [3]

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Results

Conclusion