Media Influence on Public Perceptions of Cryptocurrency

Bitcoin and other cryptocurrencies experienced a remarkable run in 2017. In retrospect, it appears that it all began in March 2017 when the SEC denied the Winklevoss brothers a Bitcoin Exchange Traded Fund. Most of the financial experts at the time predicted that if Bitcoin was denied the ETF, then its value would fall from approximately $1044 each to $551, and if the ETF was accepted, then Bitcoin value would rise to a value of $3678 (Emerita Capital, 2018).

Emerita Capital accurately predicted that the Bitcoin ETF had a less than 50/50 chance of being accepted, and the SEC declined the proposal over concerns of fraud. Specifically, the SEC said, “The proposal was at odds with the requirement that national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.”

    (Chart courtesy of Coinmarketcap.com and  99Bitcoins.com)

What happened next is remarkable, because instead of Bitcoin value plunging 50% as predicted, it began a steady and eventually frenzied climb to nearly $20,000 by the end of the year. Many factors likely contributed to this, including the daily fund-raising activities of thousands of new cryptocurrency coins and utility tokens created in unregulated Initial Coin Offerings that raised at least $5.6 billion dollars in 2017 according to an article in Business Insider (Williams-Grut, 2018).⁠

I would hypothesize that media agenda-setting also played a large part in this outcome. Agenda-setting theory describes the ability of news media to influence the importance placed on the topics of the public agenda. Basically, if a news item is covered more frequently or prominently, then the audience is more likely to regard the issue as more important.

Agenda-setting can be measured by analyzing the following attributes of a news story as described in the article “A Look at Agenda Setting: Past, Present, and Future” (McCombs, 2005)⁠:

1. Attention -the number of news stories devoted to a particular topic

2. Prominence – importance of the media outlet, or other factors to draw attention (e.g., page placement, size of headline, amount of time or space, appearance in the lead).

3. Valence - the amount of conflict in a story or its overall positive or negative tone

Basically, my untested hypothesis is that when Bitcoin gained international news coverage for the ETF, it gained a place of importance in the viewers mind. Enough importance, that even when the ETF was rejected, this had little negative impact on the viewer. The fact that the SEC would even be reviewing a cryptocurrency ETF was a sign of confidence for many investors that Bitcoin was being legitimized or on the path to legitimization in the institutional markets. It has long been believed within the cryptocurrency space, that when the institutional financial markets feel comfortable investing, and the global regulatory hurdles have been worked out, that the technology behind cryptocurrency called blockchain would receive rapid institutional investment.

I’m going to support this hypothesis by comparing it to a “Study on Media Influence on Public Perceptions of Foreign Nations” (Wanta & Golan, 2015). For the purpose of our hypothetical example, replace the term “nations” with that of cryptocurrencies for the context of this article.

“The more media coverage a nation received, the more likely respondents were to think the nation was vitally important to US. interests, supporting the agenda-setting hypothesis. The more negative coverage a nation received, the more likely respondents were to think negatively about the nation, supporting the second level of agenda setting.” (Wanta & Golan, 2015)⁠

The year 2018 has been a difficult one for the cryptocurrency markets, with strings of negative stories in the news, such as more failed ETF’s, exhange hacks, and international regulation looming but moving at a snail’s pace. The industry has had several small but short mini-booms in 2018, but it is obvious to any cryptocurrency investor that their volatile investment holdings are constantly being buffeted by negative and positive news stories that continue to sweep the markets.

The following study observed and measured blog posts of popular platforms for topics that precede market actions, and concluded that blog posts that are negative are an indicator of downward momentum, and positive blog posts can be a predictive indicator of upward market momentum.

‘Fundamental cryptocurrency value’, on the otherwise technical subreddit /r/Ethereum, precedes a positive return event; that discussion of ‘Substantial price movement’ on /r/ Bitcoin is indicative of price volatility; and that discussion of ‘Risk / investment vs trading’ on /r/BitcoinMarkets, precedes a negative return event.” “Mutual-Excitation of Cryptocurrency Market Returns and Social Media Topics” (Phillips & Gorse, 2018)

I suggest that this study could also be providing an example of agenda-setting effects. It is likely that the positive and negative stories within the media are being amplified on social media postings and affecting investor behavior.

A cursory look at news stories in the headlines of prominent news outlets reveals that the majority of news is focused on price movements, not technological innovation. Also, a large number of stories are focused on scams, hacks, and the uncertain regulatory market. A look at the Bitcoin page on Fox Business News from Sept. 6, 2018 displays the following prominent headlines among others:

Is Goldman Sachs abandoning its bitcoin plans?

AT&T sued for negligence over cryptocurrency hack

Why bitcoin, other cryptocurrencies are selling off

Bitcoin ETF ruling delayed, cryptocurrency market plunges

A cursory review of news sources specializing in cryptocurrency, like cryptocoinsnews.com tells another story:

Crypto Exchange Circle Recruits Former Homeland Security Official as Legal Chief

‘A Huge Step Forward’: Baharain Minister Hails Blockchain Tech, Urges Adoption

$112 Billion Korean Money Manger Asks for Goldman Sach’s Crypto Experts

IBM Launches Stellar-Based Blockchain Payments Platform

Iran Legitimizes Crypto Mining Industry, Bitcoin Price Spikes to $24,000 Locally

So what is a cryptocurrency marketing and PR team to do under these circumstances? From an outside perspective, it appears that many of the tech leaders have withdrawn from the major news outlets and are not getting their voices out there as much as they did in 2017. Getting back in the public eye to discuss the fundamentals of the technology is important to close the knowledge gap that many people in the public have. This means that the technical details need to be ratcheted down to very simple terms and the discussion needs to move past market swings to discuss how this technology can better people’s lives and solve real problems.

Blockspaces, in Tampa, Fla., is an organization that is working to close the knowledge gap by offering classes in cryptocurrency investment and mining to the general public, and serves as an innovation hub for the area’s software development and technology community.

It is probably fair to say that Bitcoin and cryptocurrency in general have an image problem. The technology is still often associated with dark markets like the Silk Road and is frequently bashed by prominent members of the financial elite; like Jamie Dimonof JP Morgan, when he labelled Bitcoin a fraud in Sept 2017.

In the study “Understanding Influence on Corporate Reputation,” (Kiousis, Popescu, & Mitrook, 2007), researchers tested the public relations efforts of many companies and compared those efforts with their quarterly revenues. They found certain strategic messages were more effective with the public and raised their reputation and stock.

“We found that mentions of corporate vision and leadership (managerial traits) in the Wall Street Journal were significantly correlated with company revenues, profits, and assets, respectively. On the other hand, mentions of corporate social responsibility in The New York Times were correlated with the same financial indicators.”

My recommendation, is for cryptocurrency technologists to make a more sustained effort to display corporate vision, leadership and social responsibility to their investors, but also to the public at large.

Examples of companies that are attempting to do this include Dash, which markets itself as ‘digital cash’ targeting developing nations suffering from economic hyperinflation. Another example is Humaniq, a cryptocurrency designed to “empower the unbanked” in developing nations in areas of Africa and India. Although, this has likely become more difficult to brand after the volatile price swings in 2017-2018 because stable markets will be an important factor in providing relief to those developing economies.

As reported first in the New York Times, in late 2018, a group of wealthy tech entrepreneurs moved to Puerto Rico with the stated purpose to rejuvenate the economy of Puerto Rico by starting blockchain and cryptocurrency companies in Puerto Rico. Led by Brock Pierce, they propose to create a "crypto-city" that uses blockchain technology in every conceivable manner. The effort appears to have been received graciously by local officials, but greeted cautiously by the locals who fear the gentrification of their cities and loss of cultural identity if a large area of Puerto Rico were to be transformed into a hub for the new industry.

One of the unique difficulties in creating the corporate vision and social consciousness for such market leaders as Bitcoin, Ethereum, Ripple and Bitcoin Cash, is that most of these technologies do not have your typical corporate structure. They are loosely federated teams of people participating in Decentralized Autonomous Organizations, with core development teams, but a decentralized management style that encourages the holders of coins or tokens to vote on proposals. Another issue, is that they are primarily focused on the development and scaling of their products, not branding or communicating to the public. As this technology matures, it will become more important for communicators to develop and manage relationships with the various stakeholders of the international community outside the software development community and tech-savvy investors.

About:
Michael Meyer is a graduate student at the Zimmerman School of Advertising for Mass Communications at the University of South Florida. He earned his Bachelor’s degree in multimedia journalism and production from USF in 2005. This blog focuses on various aspects of mass communications research and practice, and relates these findings to the many current technological shifts that are impacting communicators; including social media, data mining, and the emerging field of blockchain technology.

References:

CryptoCoinsNews (2018) https://www.ccn.com/

Kiousis, S., Popescu, C., & Mitrook, M. (2007). Understanding Influence on Corporate Reputation: An Examination of Public Relations Efforts, Media Coverage, Public Opinion, and Financial Performance From an Agenda-Building and Agenda-Setting Perspective. Journal of Public Relations Research, 19(2), 147–165. https://doi.org/10.1080/10627260701290661

Library, W. (2018). Bitcoin ETF Approved In March 2017: A Black Swan With Asymmetric Risk/Reward - Winklevoss Bitcoin Trust ETF (Pending:COIN) | Seeking Alpha, (March 2017), 2017–2018. Retrieved from https://seekingalpha.com/article/4044517-bitcoin-etf-approved-march-2017-black-swan-asymmetric-risk-reward

McCombs, M. (2005). A Look at Agenda-setting: Past, present and future. Journalism Studies, 6(4), 543–557. https://doi.org/10.1080/14616700500250438

Phillips, R. C., & Gorse, D. (2018). Mutual-Excitation of Cryptocurrency Market Returns and Social Media Topics, (Ickea).

Wang, S., & Vergne, J. P. (2017). Buzz Factor or Innovation Potential: What explains cryptocurrencies’ returns? PLoS ONE, 12(1), 1–17. https://doi.org/10.1371/journal.pone.0169556

Wanta, W., & Golan, G. (2015). SETTING AND INTERNATIONAL NEWS : INFLUENCE ON Public Perceptions of OF FOREIGN Nations. Journalism and Mass Communication Quarterly.

Williams-Grut, O. (2018). Only 48% of ICOs were successful last year — but startups still managed to raise $5.6 billion. Business Insider, 4–7. Retrieved from https://www.businessinsider.nl/how-much-raised-icos-2017-tokendata-2017-2018-1/?international=true&r=UK