Interplay of Cryptocurrencies with Financial and Social Media Indicators: An Entropy-Weighted Neural-MADM Approach

Abstract

In the rapidly evolving domain of digital finance, the interplay between cryptocurrencies and external variables such as financial and social media indicators warrants thorough examination. This investigation employs a novel, entropy-weighted Multiple Attribute Decision Making (MADM) model to decipher these intricate relationships. The study's foundation is an expansive dataset, meticulously compiled to encompass a broad spectrum of financial data alongside diverse social media indicators. Central to this analysis is the employment of the Stepwise Weight Assessment Ratio Analysis (SWARA) method, meticulously applied to ascertain the relative importance of various social media indicators. Complementing this, the Complex Proportional Assessment (COPRAS) methodology is adeptly utilized to derive utility functions for each cryptocurrency under scrutiny. The analytical prowess of neural network regressions is harnessed to delineate the influence exerted by a multitude of financial indicators on these utility functions. The findings of this research are pivotal in understanding the dynamics within the cryptocurrency market. Bitcoin and Ripple emerge as pivotal entities, primarily functioning as primary conduits for market shocks. In contrast, Ethereum is identified as a stabilizing force, predominantly absorbing such fluctuations. A nuanced aspect of this study is the differential impact of social media indicators on various cryptocurrencies. Bitcoin and Ethereum display a negative correlation with these indicators, suggesting a complex, possibly inverse relationship with social media dynamics. Conversely, Litecoin, Dogecoin, and Ripple exhibit a positive responsiveness, indicating a heightened susceptibility to social media attention, sentiment, and prevailing uncertainty.