eToro, a social trading network, has decided to ramp up its cryptocurrency offering. They plan to do this with a new partnership with The TIE, a data analytics platform with a focus on cryptocurrencies. This new joint venture will be solidified with a new product: TheTIE-LongOnly CopyPortfolio. It’s a bit of a mouthful to say, but it serves its purpose well. The CopyPortfolio provides retail clients within eToro access to a sentiment-based, algorithm-driven investment strategy.
In order to better predict the value of a currency, The TIE’s team, experienced as they are in data mining, developed a range of sentiment indicators and social insights. This new product tracks millions of different data points and converts professional news into quantitative analysis. It allows investors to identify emerging patterns across their relevant digital assets and enables them to trade with better knowledge because of it.
This new TheTIE-LongOnly CopyPortfolio strategy will focus on cryptocurrencies. It will algorithmically predict whether or not a digital asset will rise or fall due to sentiments rather than market statistics. It will read the immense amount of social media content to create buy or sell signals for various crypto assets.
Josh Frank, CEO of the TIE, explained that in things like Crypto, the only real thing that moves is its supply and demand. Because of that, the TIE has set out in the development of sophisticated solutions. These solutions will be used for things like hedge funds to help value and trade asset classes.
eToro isn’t the first exchange to give this sort of technology, however. Thomson Reuters launched a new form MarketPsych Indices earlier this year. This new upgrade included sentiment data for the top 100 forms of cryptocurrency. The intended goal was to encourage transparency and efficiency for virtual asset investors across the globe.
Sentiment Analysis: Emotions Over Number
It’s a lot more complicated than the explanation does it justice, but sentiment analysis is, in essence, the use of machine learning within the investment environment. This technology searches through various forms of social media, monitoring for the volume of relevant news. Within the news, it monitors the mixture of positive, negative, and neutral comments, and displaying it as a prediction over whether or not the product’s value will rise or fall.
It may seem strange to think about, but investors are also just human. They are not emotionless entities, and because they have emotions, those emotions will be used to make objectively strange choices.
More often than not, the emotional state of the investors will determine whether a stock value will fall or not. Sentiment analysis aims to try and quantify this, so an unexpected social movement doesn’t catch an unaware investor flat-footed.
Entire currencies rise and fall because of rumors and fear. The practiced investor doesn’t jump at every shadow that follows them. The intelligent investor finds out how to capitalize on it to make even more money.
eToro is a multi-asset platform that offers both investing in stocks and crypto assets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results.
Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading crypto assets is unregulated and therefore is not supervised by any EU regulatory framework.