Manifesto: Developing my own Social Interest Indicator
Background
I’ve long suspected that highly volatile and speculative assets are strongly driven by human emotion. Therefore, the „Crypto Fear and Greed Index“ appeared as a useful tool in addition to technical analysis to time market entries and exits. While this index is a useful tool for swing trading, especially when entering trades at high levels of fear after a pullback. Nevertheless, I noticed that the „Crypto Fear and Greed Index“ does not correlate well to market tops or bottoms.
Living in London, I started overhearing conversation about crypto everywhere while passing by during the period of crypto market peaks in 2021. From witnessing casual conversations in Hyde Park during my lunch walk to even mentions from my colleagues who typically were not interested in cryptocurrencies. It reminded me of the old saying: „When your cab driver or hairdresser starts giving investment tips, it’s time to get out.“ From my own observation of trending conversation themes coinciding with market tops, I came to the conclusion that there has to be a way to measure the trending investment theme and turn it into an actionable indicator for long-term cycle-based investment decisions.
Counting the witnessing random conversations in a vibrant city is not a very reliable indicator, but in today’s digital age, data about the trending interests are tracked. Social media platform are so to say the goldmines of real-time data on what people have their mind on. The data is available - you just need to tap into it and extract the valuable insights from it.
Data resources for the Social Interest Indicator
My research led me to several promising resources. First, The Block, has a alternative metrics listed on its website including a category named „Social“. This section offers crypto-specific data such as weekly X (Twitter) follower growth for exchanges, services such as CoinMarketCap and Cointelegraph, and Layer 1 Accounts. Since X is a hub for developers, funds and thought leaders, it is a logical starting point for tracking social momentum.
However, X doesn’t give the whole picture. Many retail investors, especially in bull runs, don’t obtain their information first-hand from X, but instead from YouTube channels for informations on crypto basics, market updates and trading strategies. Since 2010 Social Blade has been pulling daily statistics of YouTube channels via its public APIs (application programming interfaces). It monitors followers and views of YouTube channel, with data dating back three years to comply with EU privacy laws. Over time, Social Blade expanded to include Instagram metrics and, since 2020, TikTok. This makes Social Blade a treasure box for data with regards to crypto influencers and evaluation of retail interest.
The dynamic market shares of social media platforms has to be kept in mind. Recently, TikTok has grown rapidly in popularity, especially among Gen Z. Tools like TikTok Creative Center offer keyword insights, while Exolyt provides detailed analytics, including hashtag trends. For a broader view, Talkwalker aggregates data across platforms - X, YouTube, TikTok, and others - while adding sentiment analysis to the mix. These resources form the first building blocks for my Social Interest Indicator.
From Data to Indicator
With all the data at my fingertips, it’s easy to feel overwhelmed without a structure. My plan is to analyze these sources against past market cycles, testing how well they correlate with peaks and bottoms. From there, I’ll construct the Social Interest Indicator step-by-step, including data from X, YouTube, TikTok and other sources. Each input and platform will be weighted based on its predictive accuracy and its characteristic user base of investors. While X is more representative for market action of the crypto OGs and hedge funds, TikTok trends in crypto reflects the retail crowd and speculators entering the market.
The goal is to develop an social interest indicator that beats the Buy&Hold- and Fear and Greed Index-strategy. In comparison with stocks, crypto had a unique allure in the last decade that drew more public interest. As a result, hypes in the crypto market have been amplified by social media. An indicator that prints a sell signal on the chart when the Bitcoin conversations are omnipresent on all social media platforms, is definitely a valuable element for a practical, cycle-based investment strategy. It’s not about replacing other technical signals, but adding another social metric to the mix of indicator for successful investing.
That said, I won’t ignore intuition and the simplest indicator of all: when cab driver and hairdresser start boasting about their crypto gains, it’s probably time to cash out and watch from the sidelines. Sometimes, common sense and intuition are the best indicators of all.