Dynamic Topic Modelling for Cryptocurrency Community Forums

SFB 649 Discussion Paper 2016-051

22 Pages Posted: 28 Nov 2016

See all articles by Marco Linton

Marco Linton

University of York

Ernie G. S. Teo

NUS Business School

Elisabeth Bommes

Humboldt University of Berlin

Cathy Chen

Humboldt University of Berlin

Wolfgang K. Härdle

Blockchain Research Center; Xiamen University - Wang Yanan Institute for Studies in Economics (WISE); Charles University; National Yang Ming Chiao Tung University; Humboldt University of Berlin - Center for Applied Statistics and Economics (CASE)

Date Written: November 25, 2016

Abstract

Cryptocurrencies are more and more used in official cash flows and exchange of goods. Bitcoin and the underlying blockchain technology have been looked at by big companies that are adopting and investing in this technology. The CRIX Index of cryptocurrencies hu.berlin/CRIX indicates a wider acceptance of cryptos. One reason for its prosperity certainly being a security aspect, since the underlying network of cryptos is decentralized. It is also unregulated and highly volatile, making the risk assessment at any given moment difficult. In message boards one finds a huge source of information in the form of unstructured text written by e.g. Bitcoin developers and investors. We collect from a popular crypto currency message board texts, user information and associated time stamps. We then provide an indicator for fraudulent schemes. This indicator is constructed using dynamic topic modelling, text mining and unsupervised machine learning. We study how opinions and the evolution of topics are connected with big events in the cryptocurrency universe. Furthermore, the predictive power of these techniques are investigated, comparing the results to known events in the cryptocurrency space. We also test hypothesis of self-fulling prophecies and herding behaviour using the results.

Keywords: Dynamic Topic Modelling, Cryptocurrencies, Financial Risk

JEL Classification: C19, G09, G10

Suggested Citation

Linton, Marco and Teo, Ernie G. S. and Bommes, Elisabeth and Chen, Cathy and Härdle, Wolfgang K., Dynamic Topic Modelling for Cryptocurrency Community Forums (November 25, 2016). SFB 649 Discussion Paper 2016-051, Available at SSRN: https://ssrn.com/abstract=2875661 or http://dx.doi.org/10.2139/ssrn.2875661

Marco Linton

University of York

Heslington
University of York
York, YO10 5DD
United Kingdom

Ernie G. S. Teo

NUS Business School ( email )

15 Kent Ridge Drive
119245
Singapore

Elisabeth Bommes

Humboldt University of Berlin ( email )

Unter den Linden 6
Berlin, AK Berlin 10099
Germany

Cathy Chen

Humboldt University of Berlin ( email )

Unter den Linden 6
Berlin, AK Berlin 10099
Germany

Wolfgang K. Härdle (Contact Author)

Blockchain Research Center ( email )

Unter den Linden 6
Berlin, D-10099
Germany

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE) ( email )

A 307, Economics Building
Xiamen, Fujian 10246
China

Charles University ( email )

Celetná 13
Dept Math Physics
Praha 1, 116 36
Czech Republic

National Yang Ming Chiao Tung University ( email )

No. 1001, Daxue Rd. East Dist.
Hsinchu City 300093
Taiwan

Humboldt University of Berlin - Center for Applied Statistics and Economics (CASE)

Unter den Linden 6
Berlin, D-10099
Germany

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