Why Twitter Bots Might Be Bad for Cryptocurrency Marketing Strategies

This article briefly:

Twitter bots could distort perceptions of cryptocurrency popularity, artificially boost social media engagement and mislead potential investors.

It has been found that cryptocurrencies with excessively high participation coefficients can be inflated by bot activity, often yielding lower returns after short-term growth.

· While social media is an important tool for cryptocurrency marketing, long-term returns are less dependent on social media functionality, thus requiring a balanced strategy.

There is no denying that social media is critical to the promotion and success of cryptocurrencies. Twitter is a proven tool platform.

Still, amid all its usefulness lurks a darker truth, the existence of Twitter bots and their potential to upend cryptocurrency marketing strategies.

Twitter Bots Increase Engagement

Research has shown a significant correlation between social media engagement and returns for cryptocurrencies. Engagement is measured by factors ranging from likes and retweets to when coins were created, and it indicates how online audiences react to crypto assets.

However, an unbalanced participation coefficient may lead to wrong investment decisions.

One of the shocking findings from research into cryptocurrencies and their social media engagement is the influence of Twitter bots. These automated accounts account for between 9% and 15% of active Twitter users and could boost the cryptocurrency's popularity.

Twitter bot probability returns. Source: Plos One

These bots often create an illusion of general excitement, a common tactic in pump and dump schemes. Therefore, artificial inflation can lead to abnormally high participation coefficients, thereby misleading investors and distorting marketing strategies.

Fake engagement has proven to be costly

Cryptocurrencies with extremely high participation coefficients have been found to have lower returns.

For example, Krypto has achieved an impressive return of 49% after two months. Then, its returns fell sharply into negative territory. Krypto’s participation coefficient is almost an order of magnitude larger than other cryptocurrencies, suggesting possible bot interference.

Crypto participation coefficient. Source: Plos One

The study also analyzed the prevalence of bot activity in cryptocurrency discussions using a tool called the Botometer. The algorithm calculates the probability that a Twitter account is a bot. A higher average bot probability correlates with lower performing cryptocurrencies.

Latte, a DeFi cryptocurrency with the highest average bot probability, saw a 95% price drop in three months.

A Cautionary Tale for Investors

The study suggests that when a cryptocurrency's participation coefficient exceeds 10−3, vigilance may be warranted, as manipulation may be suspected. Investment strategies based on these data also suggest that participation coefficients may be useful for selecting cryptocurrencies with short-term high returns.

However, this approach may not be the best option for those aiming for long-term growth.

return and time. Source: Plos One

The return on the investment is negative within one year, and when the return is negative, there is no significant difference in returns with respect to the feature threshold.

This suggests that long-term returns are less dependent on social media features than short-term returns.

Cryptocurrency marketers must take note

So, how does this affect your cryptocurrency marketing strategy? Research suggests vigilance. While social media is a powerful tool, it's important to understand that not all engagement is beneficial.

Twitter could damage the overall credibility of cryptocurrency marketing efforts. If a token’s apparent popularity turns out to be driven by bots rather than genuine engagement, it could damage the brand image and trust in the project itself and its team.

Twitter bots can distort perceptions and can lead to an unstable and uncertain investment environment. For steady, long-term growth, a balanced approach to marketing is recommended, including but not solely relying on social media engagement.

It's not just numbers, it's real human interest and a loyal community and activity behind those numbers that really matters to a successful cryptocurrency marketing strategy.