X Factor: Which coins will benefit from Twitter’s new crypto trading deal?
On April 13, Twitter (now officially known as X Corp.) announced a new partnership with online trading platform eToro that will enable trading of stocks and crypto via social media. When Twitter users see others tweeting about a particular cryptocurrency, they can essentially just press a button and they will be transferred to the eToro platform to make a trade for that crypto.
The move has the potential to shake up the world of stock and crypto trading. By some estimates, there are 4.7 million searches every day on Twitter for companies and cryptos that use the social media platform’s “cashtags” feature.
Even though crypto only accounts for about 20% of those searches, that’s still 1 million searches per day. It can significantly increase crypto trading volume. So which cryptos will benefit the most?
1. Cryptos that are social media darlings
The biggest impact is likely to be seen with cryptos that get a lot of heavy social media buzz, such as Bitcoin (BTC 3.35%) and Dogecoin (DOGE 2.17%). The former is already the world’s most popular crypto in terms of market cap, and it’s nearly impossible to spend any significant amount of time on Twitter without seeing mention of it in your social media feed.
Bitcoin already accounts for 46% of the total crypto market capitalization, and that percentage is likely to rise in the wake of the Twitter deal.
Another big social media darling, Dogecoin has become the personal favorite of Elon Musk. It’s easy to see how Dogecoin could become the poster child for what’s possible with the Twitter-eToro partnership.
Already this year, Musk has taken a number of steps to promote Dogecoin on Twitter, even going so far as to temporarily replace the iconic bird logo with the Shiba Inu dog mascot of Dogecoin.
2. Cryptos with loyal fans and developer communities
The next major category of coins that could benefit from this Twitter deal include cryptos with loyal fans and developers. An example is XRP (XRP 2.91%), formerly known as Ripple. Right now, XRP is engaged in a legal battle with the Securities and Exchange Commission, and Twitter has become the place to find out the latest developments in the case.
The supporters of XRP even have a name (the “XRP Army”) and they can have a huge influence online in shaping the narrative around the crypto. On any given day, you can find hashtags like #Ripple and #XRP on Twitter.
But there are other, less speculative cryptos that also have loyal developer communities. For example, all the top Layer 1 blockchain networks — such as Ethereum (CRYPTO: ETH), Solana (CRYPTO: SOL)and Cardano (CRYPTO: ADA) — has extensive worldwide communities and fan bases. These can also benefit from the Twitter agreement. As long as fans and developers tweet about them online, it increases the likelihood that other Twitter users will switch them.
3. Momentum cryptos and meme coins
The problem, however, is that social media influencers and online shills can use Twitter as a playground to pump up the price of coins and tokens that may have very little underlying value. Crypto is still the wild west in this regard.
Although the SEC has taken some steps to shut down crypto pump-and-dump operations, they still exist. The typical scam involves a crypto with amazing momentum, a very low price and almost unlimited upside potential.
Other sightings include tokens that sound a lot like popular coins but are actually worthless. Social media influencer Kim Kardashian ran into trouble for this with the SEC, leading to a highly publicized $1.26 million settlement in October. Kardashian thought she was promoting Ethereum (currently trading at around $2090), but she was actually promoting something called EthereumMax (currently trading at $0.000000001979).
Investor takeaways
My primary concern is that the Twitter deal is going to change the way people invest in digital currency. Crypto investments, which are already heavily focused on short-term profits, may become even more focused on the short term.
Instead of concentrating on cryptos that have solid long-term value, investors are going to focus on those that show immediate price action. After all, it’s only fun to show social media followers a trading chart if a crypto is shooting for the moon. Additionally, people may be tempted to buy coins just because they are trending on Twitter or because Musk is tweeting about them.
At the end of the day, I think the Twitter deal will be good for crypto, mostly because it will make trading more mainstream, and will help bring crypto to the masses.
As long as you keep a long-term mindset and stick to digital coins with strong fundamentals, checking in on what’s happening on Twitter from time to time can be another way to make you a better crypto investor.
Dominic Basulto has positions in Bitcoin, Cardano and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Cardano, Ethereum and Solana. The Motley Fool has a disclosure policy.
