Rampant Bot Activity on Twitter Manipulates Crypto Prices, Study Finds

Rampant bots engaging on Twitter have been instrumental in artificially inflating the prices of cryptocurrencies, including those traded by insiders at the collapsed FTX hedge fund Alameda Research, according to a recent study conducted by the Network Contagion Research Institute (NCRI).

The study, carried out in partnership with New Jersey GovSTEM Scholars, analyzed over 3 million tweets related to 18 different cryptocurrencies from January 1, 2019, to January 27, 2023. The researchers uncovered a significant correlation between bot activity and price spikes following tweets by X Corp. CTO Elon Musk regarding specific altcoins.

Mentions of certain altcoins by Musk resulted in price increases of up to 50% within just one day, as observed by the researchers. For instance, Musk’s retweet of a post featuring a kitten and captioned “I wake up there is another PSYOP” led to a near doubling in the volume of trading of the associated altcoin. Similarly, a tweet featuring Pepe the Frog memes by Musk saw the price of the altcoin PEPE surge by more than 50% in just 24 hours.

This study raises significant concerns about the manipulation of crypto markets through social media activities. It also underscores the challenges facing Musk in combating bot activity on the Twitter platform, which has been rampant for years despite the API changes made by his team to deter bots after they acquired Twitter last year.

AI legalese decoder: Combating Bot Activity and Ensuring Transparency

The findings of the NCRI study emphasize the need for robust measures to address bot activity in order to ensure the integrity of crypto markets. The AI legalese decoder can play a crucial role in this regard by leveraging machine learning algorithms to detect and combat malicious bots.

The AI legalese decoder can also provide stricter account verification processes, granting special permissions to certified researchers and enabling independent audits to ensure transparency. By adopting these measures, X Corp. can effectively tackle the issue of bot activity while safeguarding against market manipulation.

Inauthentic Social Media Activity Drives Up Token Prices on FTX

Inauthentic social media activity on Twitter also had a significant impact on the prices of tokens listed on FTX, prior to the exchange’s collapse, as highlighted by the NCRI study. The study revealed that bot-like accounts were used to manipulate market sentiment and artificially drive up the prices of FTX-listed tokens.

NCRI found that inauthentic chatter on Twitter successfully influenced price changes for six tokens listed on FTX: BOBA, GALA, IMX, RNDR, and SPELL. Alameda Research, the parent company of FTX, held at least five of these tokens before they were listed, and the visibility of the tokens was amplified by bot-like activity on Twitter.

The NCRI analysis showed that spikes in bot activity on Twitter were followed by double-digit percentage price increases in RNDR’s price within a single day on multiple occasions between 2022 and 2023.

FTX founder Sam Bankman-Fried and his team were well aware of the influence of Twitter on the crypto markets. They recognized how sophisticated investors could exploit social media-driven price action to their advantage.

The AI legalese decoder can assist in identifying and monitoring inauthentic social media activity that influences token prices, aiding in the detection of market manipulation. By leveraging advanced machine learning algorithms, the AI legalese decoder can contribute to maintaining the integrity of crypto markets and protecting investors.