An Index Fund analysis based upon Twitter activity of Elon Musk impacting the Valuation of Bitcoin, Dogecoin & Tesla Stock
Let’s buy whatever Elon is buying
Abstract
This white paper investigates an Index Fund comprising Bitcoin (BTC), Dogecoin & Tesla Stock based upon a real-time analysis of the Twitter activity of Elon Musk. Twitter is a modern-day virtual spot for discussions, having its primary activity in keeping everyone up to date with what is happening worldwide. Emerging events or news are often followed almost instantly by a burst in Twitter volume. A New Trend of celebrity tweets on various topics has been on a recent rise. Due to the high following of the celebrities on social media platforms like Twitter, such tweets assume a significant role in influencing the perceptions developed towards various organizations. Therefore, a positive tweet for a company can take its valuation towards the upper end & vice versa. In the Following Paper, We aim to establish a link between How the twitter activity of Elon Musk impacts the valuation of Bitcoin, Dogecoin & Tesla Stock & Deriving an Optimal Index Fund using our analysis.
1. Introduction
Social media platforms have become a significant, influential source throughout the world. As technology is progressing, newer modes of being socially active are emerging each day. However, the success of a social media application depends upon what it is offering to the end-users. The social media tycoon like Twitter has greatly exemplified such success. Twitter is an American microblogging platform where users interact with messages and content collectively known as “tweets”. Users may access Twitter through its website interface or its application software (app). The headquarters for Twitter is based in San Francisco, California and has more than 25 offices worldwide. Twitter allows users to post tweets, messages of up to 140 characters on its social network. Twitter usage is growing rapidly. It is reported that Twitter has an active user base of 100 million & they exchange over 250 million tweets each day.
Studies of Twitter make use of many approaches (from computational modeling to critical inquiry). Alongside the studies, analyze a wide range of phenomena while keeping a set of assumptions intact while getting to the core purpose behind Twitter. For example, Is Twitter a site of public debate? A tool for journalism, activism, education, and public relations? A data source for scientists, pollsters, and marketers? The mass of data generated each day by a user base exceeding 500 million accounts worldwide makes Twitter both fascinating and impossible to describe holistically.
Twitter’s embeddedness in everyday social and communicative interactions across so many nations of the developed world, and its role as a very public, global, real-time communications channel highlight the fact that it — alongside. Other major social media, like Facebook or YouTube, provide us with a new window to analyze societal behaviors and how they impact everything around us.
Our report aims at building an Index Fund comprising Bitcoin, Dogecoin, Tesla. The parameter for weight assigning is based upon the data fetched from Elon Musk, a successful entrepreneur and owner of Tesla, Space X.
Living in times when companies are hiring influencers to promote their brands, Our report focuses on establishing this ‘influential link’ with the stock market and how such changes translate into the market.
2. Information on Stocks/Coins
In This section, We provide the expected rate of return, market cap (as of 28/03/2021), the trading volume of the stocks that will comprise our index fund. (BTC, Dogecoin & Tesla)
Bitcoin (BTC) is a type of cryptocurrency. There are no physical bitcoins, only balances kept on a public ledger that everyone has transparent access. Bitcoins are not issued or backed by any banks or governments, nor are individual bitcoins valuable as a commodity. Dogecoin is a cryptocurrency invented by software engineers Billy Markus and Jackson Palmer, who decided to create a payment system that is instant, fun, and free from traditional banking fees. Dogecoin features the face of the Shiba Inu dog from the “Doge” meme as its logo and namesake. Founded in 2003, Tesla designs, develops, manufactures, and markets high-performance, technologically advanced electric cars and solar energy generation and energy storage products.
3. Data Set For Analysis
In the following section, we analyze the Twitter Activity of Elon Musk. We take into account the tweets that are relevant to Bitcoin & Dogecoin. Corresponding to those tweets, we shall be analyzing the stock performance around those dates.
The Twitter bio change to #bitcoin had an immediate effect on Bitcoin. Minute by minute returns are below 0.5% in the six hours before the event and increase to over 2% after the event. For example, the Bitcoin price increases from just over $32,000 to over $38,000 within three hours. The increases shown in Figure 4 are even more extreme. For example, the average trading volume of DOGE/USDT in the 30 minutes before the event was about $1,942 per minute, with an average of 9 trades per minute. During the 30 minutes after the tweet, the average trading volume per minute was about $299,330, with 775 trades per minute. The tweet stating “I only sell Doge” also resulted in very strong short-term price and volume increases, which, however, already occur about 45 minutes before the tweet is published. After the actual tweet, we observe a further price increase and a new high in traded volume. The increase in the Dogecoin & the Bitcoin trading volume corresponds to the Twitter Activity of Elon Musk. (Refer to the graphs below)
Elon Musk Twitter Account Activity Analysis
Day of Week : This chart represents the average daily Twitter activity by Elon Musk during the seven days of a week. It helps us infer that his highest activity happens to be on Thursdays, followed by Fridays, Sundays, Saturdays, Tuesdays, Wednesdays, and Monday being the lowest amongst all.
Tweet Volume : This chart helps us arrive at the number of tweets made by Musk from July 2020 to April 2021. According to the chart, He was greatly active during July on average. Further, Major Twitter Activity corresponding to cryptocurrency has been during February, December, and March.
Daily Rhythm : This chart is an extremely important indicator for assessing the highly active timings for Elon Musk on Twitter. The dark blue area is a depiction of a great level of activity during that hour. As the area lightens, the level of activity decreases. For example, as inferred from the chart, 11 AM to 5 PM is a highly active time slot on all days of the week on average.
4. Computation: Weighted Average Score & Relative Weights
Relative Weight of BTC & Dogecoin
To arrive at concrete weights for Dogecoin and Bitcoin, We will be analyzing the average scores and assigning weights to the averages based upon a significance level. Comments or Replies exhibit how interested people are in engaging in a discussion. Therefore, we will assign a weight of 0.45 to the average for replies. Further, Retweets and Quote Tweets signify a greater engagement than likes. A weight of 0.35 is considered appropriate for the summation of retweets and quote tweets. In the end, we assign a weight of 0.2 to the average of likes. Using this computation, we shall be arriving at a weighted average score.
Computation Formula : 0.45(Average Replies) + 0.35(Retweets + Quote Retweets) + 0.2(Likes) = Weighted Average Score
These weighted average scores will be used to gauge the level of relevance of the two coins on Musk’s Twitter.
According to the final scores for BTC & Dogecoin, We arrive at the following level of significance for the respective coins as per Musk’s Twitter Activity: 1.642 for BTC & 1 for Dogecoin. These are the respective relative weights for BTC and Dogecoin for the Index Fund.
Relative Weight between Tesla Stock (Tesla Holdings) & Tesla Stock (In BTC Holdings)
In this section, we aim to arrive at the relative weights for Tesla Stock held in a Non-Crypto Form & Tesla Stock held in BTC.
Recently, an announcement was made that Tesla could be bought using Bitcoin. This has opened up a new door for Bitcoin’s expansion as a currency and, in turn, fuelled its liquidity.
According to our computation, the weightage of Tesla Holdings in terms of Tesla is 176.9 times the Tesla Holdings in terms of BTC. Therefore, the relative weightage stands at 176.9: 1.
5. Index Fund design based upon Elon Musk’s Twitter Activity
We form our Final Index Fund based upon the weighted average scores of the Twitter activity components and relative weights between the stocks. Keeping a constraint of having a minimum of 5% of each stock, we have optimized the fund to obtain weights that satisfy the condition of maximizing the returns while keeping the volatility at its minimum as well as introducing the weights according to the proportion of relative weights calculated above (Fulfilling the parameter of being as per Elon Musk’s Data Set)
Index Fund fininal weights:
We compute the final optimized index fund weights using two parameters : A) Twitter Activity By Elon Musk & B) Market Conditions.
According to the Twitter Activity by Elon Musk, We have calculated the relative weight proportion ratio as above. Further, to gauge the market conditions, we have set optimization constraints of Keeping the highest return giving stock to be at least 50% of the Fund, the Second highest valuable stock to be at least 30%, and the least valuable stock to be at least 5%.
Using this approach, we arrive at the following :
Conclusion
We investigated the impact of Elon Musk’s Twitter messages on cryptocurrency markets. We conclude with our Index Fund, which is optimized, keeping in view the Twitter Activity by Elon Musk and Minimizing the fund’s overall volatility. In the modern-day world, such impactful parameters must be taken into account to arrive at Funds that replicate the market as closely as possible.
About BigWave
BigWave was founded by a group of retail investors, financial institution investments analyst, and Blockchain Engineers, believing that there is a significant insight to be gained from the “whales” of the cryptocurrency market. And we believe building a bridge between whales and investors can help BigWave users achieve the best investment return with low risks.
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