Coin Market Behavior using Social Sentiment Markov Chains

2017 was the pivotal year for the cryptocurrency made its foray into the mainstream financial markets. However, in 2018 it was a panic itself. For the market, it is imperative to ruminate reasonable analysis and expectations compiling various situations. We examine the dynamic interactions between the coin market behavior and market events and social metrics to incorporate potential coin traders’ social belief and response into the market moves. We use hidden Markov model performing four different experiments in two-coin markets. We show that market events such as closing price and trading volume are important predictors for the coin market behavior, but not equally in all experiments. Interestingly, hidden Markov process demonstrates that social media metrics fairly explain the future behavior of the coin markets. Overall, this study shows the combined impact of market events and social factors through varied sequences adjusted for each market situation on the coin market behavior.