October 16, 2019 – eToro formally launches “The TIE/eToro CopyPortfolio”, a new financial instrument that intends to leverage sentiments by cryptocurrency enthusiasts on Twitter. As a “CopyPortfolio”, eToro users can “copy” this instrument as part of their portfolio.*
According to the website and crypto tool The Tie, this portfolio, created in partnership with The Social Market Analytics (SMA), “leverages the wisdom of the crowd” as well as The Tie’s “sentiment analytics”. Since its launch, the company claims that “The TIE/eToro CopyPortfolio” has outperformed leading coins by marketcap.
How is the financial instrument created? The strategy involves allocating into cryptocurrencies that have increasingly positive sentiments on social media. “Once the number of people discussing a particular coin has dramatically increased, the signal is no longer valid and the position is exited,” it said. The company also said there is no human intervention during the trading process and that rebalancing of the portfolio is done algorithmically every month.
Sentiment, they claim, is the leading indicator of the cryptocurrency price movement. The analytics will parse through 850 million tweets and scan them individually to extract tweets related to a particular crypto. Of course, terms are group together, like Litecoin and LTC. A filter will assess the relevancy of the data and remove spam. After this process, over 90% of the tweets will be removed, which is 765 million tweets. Algorithms are employed to identify and rate professional investors and traders. Each word in the tweet will be individually scored until a “Raw Sentiment Score” is established, which is then converted into actionable insights. This entire process is done in less than 1/3rd of second.
As for the portfolio selection, a minimum of three positions are always held in the following cryptocurrencies:
- Bitcoin Cash
- Ethereum Classic
As of October 16, 2019, the portfolio consists of the following:
- Dash 47.54%
- EOS – 23.34%
- XRP – 22.05%
- MIOTA – 5.10%
- ETC – 1.95%
The TIE provided a projection on what could the returns be in the past 12 months based on how it does the crypto allocation. It would have resulted in a 301% profit for 2019. Note than in their simulation, there were only 4 months in 2019 where the portfolio in the green – February – May 2019. Even so, the 410% increase in February 2019 alone diluted the negative returns in the other months, which posted double-digit declines.
Coindesk interviewed Stuart Colianni, who previously researched the relationship between Twitter sentiments and valuations. He told the website that massive swings could turn off investors. He said, “while the concept is really good and probably fertile ground for pursuing new investment strategies, people just have to be wary of the amount of risk they are potentially exposed to.” The TIE understands this and mentioned that in the future they will work on a product that has 50% long and 50% short positions, making the person’s net exposure to the market zero.
This article is published on BitPinas: eToro New CopyPortfolio is a Crypto Investment Based on Twitter Mentions