How The TIE Uses Social Media Analytics To Trade Crypto

How The TIE Uses Social Media Analytics To Trade Crypto
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Imagine if you could listen to every conversation about crypto across Twitter in order to feel out the sentiment people have about a particular asset and use that to make better and smarter investment decisions? If this sounds like science fiction, read on to have your mind blown.

BASIC

The TIE is a sentiment-data-based portfolio that is analyzing tweets to make investment decisions. The TIE’s crypto strategies were developed to harness crowd-sourced knowledge (sentiment).

The TIE parses through over one-billion tweets every day, using proprietary machine learning and natural language processing technology to derive sentiment of cryptocurrencies.

In partnership with eToro, we interviewed Joshua Frank, the founder, and CEO of the TIE, which is part of the eToro CopyPortfolio program and made a 72% profit in 2020

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What Is The TIE And What Is Your Role At The Company?

Joshua Frank, Co-Founder and CEO of The TIE. The TIE is the leading provider of actionable analytics for the cryptocurrency industry. Our data powers the largest institutional investors and digital asset market participants. Our clients collectively trade and manage billions of dollars worth of cryptocurrency.

Among our core offerings is the leading sentiment analytics feed for cryptocurrency. We ingest the real-time feed of every tweet directly from Twitter and use AI technology to derive measures of how positive or negative investors are about particular digital assets, like Bitcoin.

Can You Walk Me Through An Example?

Believe it or not, there are now over one-billion tweets every day that we analyze and flag for mentions of cryptocurrency. 

Let’s say our algorithm that is reviewing tweets reports an uptick in optimism for the price of Bitcoin. This is market sentiment. The CopyPortfolio that we developed for eToro gauges investor sentiment and each month algorithmically determines a basket of assets to allocate to. 

Historically we have seen that sentiment data is the most predictive dataset for cryptocurrency prices.

And This Works?

Absolutely. Check out this chart below that shows the correlation between market sentiment (negative or positive) and the price of Bitcoin.

Our team of data scientists developed our CopyPortfolio to take advantage of these proprietary sentiment signals to outperform the market. This strategy (TheTIE-LongOnly) is exclusively available on eToro.

The TIE chart

Crypto Seems To Be Making A Major Comeback This Year — How Has Sentiment Been?

It is widespread knowledge within the crypto industry that when no one is talking about crypto, buy Bitcoin and when everyone is talking about Bitcoin, buy altcoins.

That said, you’re right — this year we have seen an increase across the board in terms of the number of users discussing digital assets. Long-term measures of investor sentiment on Bitcoin and major altcoins are significantly positive.

Depending on the collective data, that might mean sell Bitcoin or buy it. This year, as you can see in the chart below, people have been talking a lot about Bitcoin and the overall sentiment is one that our rules tell us to buy Bitcoin. Thankfully, it has really worked out for our investors!

The TIE Chart 2

How Has Your Portfolio Performed This Year, Especially In Comparison To Stocks And Gold?

Glad you asked! We’ve actually outperformed the S&P 500, gold, and Bitcoin. As your readers may know, Bitcoin is just one cryptocurrency and a volatile one at that. The TIE trades hundreds of cryptocurrencies which is how we’ve managed to even outperform Bitcoin. 

Year-to-date we’ve seen a 72% profit. 

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Is eToro Where You Recommend Investors Go To Follow Your Strategy?

eToro is our exclusive partner and the only platform that we would want to partner with for this strategy. eToro is the leading social trading network, The TIE is the leading social sentiment provider — it was a natural fit. eToro has been an awesome partner for us because their platform embraces combining social signals with cryptocurrency markets. 

I’ve noticed that people want to diversify their portfolios to include alternative assets, like cryptocurrency, but have no clue where to begin. 

You can start with eToro. Create a free account, deposit $2,000 (the minimum) and look for The TIE under the official list of eToro’s partners and select “Copy Portfolio.” When you do this, your $2,000 will buy and sell cryptocurrencies exactly how we trade and sell cryptocurrencies.

What If A Person Isn’t Already Invested In Stocks — Do You Still Recommend They Invest In Crypto?

I do not make investment recommendations, but I personally hold a percentage of my net worth in Bitcoin. The Federal Reserve is printing trillions and trillions of dollars and as we all learned in basic economics, where there is no scarcity, there is inflation.

Maybe there isn’t a lot of inflation right now, but eventually, it will catch up. I like Bitcoin because it is a scarce asset and if someone is earning wages in U.S. dollars, it is not a bad idea to convert a portion of that money to a hard asset like Bitcoin. Think of Bitcoin as a hedge.

My Thoughts

What an interesting investing strategy! Basing your trades on overall sentiment seems like it could be a good approach to trading. Even more so, copying someone who’s doing it relatively successfully can save you a lot of time and work. 

That’s why we think that the eToro Popular Investor program is awesome. You can find an investor you want to follow and copy, and, with a few clicks, you can mimic their trades.

Furthermore, if you want to post your results and trades, you can become a Popular Investor yourself. The more you are getting copied, the bigger your AUM (Assets Under Management). 

At some point, you will get 2% on a yearly basis of your AUM from eToro directly

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