How Sentiment Impacts the Success of Blockchain Startups – An Analysis of Social Media Data and Initial Coin Offerings

Abstract

The blockchain technology is subject to intensive discourse on social media. One example is the promotion of Initial Coin Offerings (ICO) as a new financial instrument for startups. As ICOs are generally low-regulated, potential investors and entrepreneurs are faced with decision-making under uncertainty. This uncertainty might be partially offset by social factors. Based on established behavioral, economic and information systems theory, we investigate how different social media channels are linked to the capitalization of blockchain startups. We present empirical evidence from online search trends, financial data and a corpus of 231,758 tweets related to 524 ICOs. Our results suggest that higher search volume, positive sentiment and the increased use of emotive language on Twitter are linked to a high capitalization. The results are relevant for startups and potential ICO investors.

Initial Coin Offerings: Financing Growth with Cryptocurrency Token Sales

“…ICOs are a fundraising mechanism in which a new token is sold to investors and prospective returns, see Benedetti and Kostovetsky (2018), Chanson et al (2018), Dittmar and Wu (2018), Drobetz et al (2018), Hu et al (2018), Lu (2018), Momtaz (2018a), Stastny (2018), Yuryev (2018), and Stanley (2019). On the amount raised, including failure to meet a set target, see Adhami et al (2018), , Ante et al (2018), Blaseg (2018), Burns and Moro (2018), Davydiuk et al (2018), Feng et al (2018), Fenu et al (2018), Fisch (2018), , Momtaz (2018b), Momtaz (2018c), Rhue (2018b), Albrecht et al (2019), Ante and Fiedler (2019), Cai and Gomaa (2019), Cerchiello et al (2019), Chen (2019), Johnson and Yi (2019), Masiak et al (2019), Philippi et al (2019), and Wu et al (2019). On liquidity see Bourveau et al (2018), Lyandres et al (2018), and Fisch and Momtaz (2019).…”

Initial Coin Offerings: Financing Growth with Cryptocurrency Token Sales

“…ICOs are a fundraising mechanism in which a new token is sold to investors and prospective returns, see Benedetti and Kostovetsky (2018), Chanson et al (2018), Dittmar and Wu (2018), Drobetz et al (2018), Hu et al (2018), Lu (2018), Momtaz (2018a), Stastny (2018), Yuryev (2018), and Stanley (2019). On the amount raised, including failure to meet a set target, see Adhami et al (2018), , Ante et al (2018), Blaseg (2018), Burns and Moro (2018), Davydiuk et al (2018), Feng et al (2018), Fenu et al (2018), Fisch (2018), , Momtaz (2018b), Momtaz (2018c), Rhue (2018b), Albrecht et al (2019), Ante and Fiedler (2019), Cai and Gomaa (2019), Cerchiello et al (2019), Chen (2019), Johnson and Yi (2019), Masiak et al (2019), Philippi et al (2019), and Wu et al (2019). On liquidity see Bourveau et al (2018), Lyandres et al (2018), and Fisch and Momtaz (2019).…”

Initial coin offerings and the cryptocurrency hype - the moderating role of exogenous and endogenous signals

“…Also, many scholars investigate the effects of social media on ICO campaigns. For instance, a positive sentiment of tweets (Albrecht et al 2019) or a high twitter activity (Benedetti and Kostovetsky 2018) leads to a higher market capitalization of an ICO and Fiedler and Sandner (2017) pointed out that premium ICOs show an above-average activity on Twitter, Facebook and LinkedIn. However, existing research cannot provide a sufficient explanation of whether different quality signals influence the amount of funds raised in ICO campaigns or their moderating influence on hype-driven market prices.…”