Reddit vs Twitter : Are they playing or helping investors?

Both Reddit and Twitter have seen controversy recently over their sway in investment circles.

The start of this was the infamous game stop subReddit channel - where a group of, mainly younger, investors “clubbed together” to “game” the investment fortunes of a tiny, forgotten, and much-maligned computer gaming company.

The results of their tactics are now history – but it highlighted a phenomenon that is becoming more and more prominent and skews the traditional methods by which investments gain traction in an open market.

From the same vein 

Both of these channels are open forums where anyone can throw in their two cents – for good or ill.

In common with any social media platform, some people are followed more than others because they give better, more accurate, and more frequent information, perhaps – while others are “lurkers” and gather information rather than disseminate it. Of course, there are always those who do both.

Twitter’s investment gang is collectively known as “Finwit” - this is short for “Financial Twitterers.” Unlike Reddit, this group is not a coherent entity, but just a bunch of like-minded individuals who comment on financial news, post charts, and other information they feel is worthwhile.

They are followed, accordingly, by those who find their information valuable and accurate.

Within Finwit, you can find everyone from billionaire and multi-millionaire investors through to students and teenagers dipping their toes into the investment waters for the first time.

Over on Reddit, you can find “Sub-Reddits” of groups of like-minded individuals who are looking; for advice, or investors, or giving advice, or looking to invest.

As an example, there is a “Fintech,” or Financial Technology, Sub-Reddit. It has around 18,500 members and gives its mission as “A place to discuss how technology is changing financial services. We are a community of fintech enthusiasts bubbling up new tools, technologies, and platforms in various industries, including (but not necessarily limited to) banking, payments, insurance, investing, and lending.”

By contrast, Twitter is far more individualistic. There are loose “gangs” of people with similar interests and ideas that overlap – but it is far more difficult to “compartmentalize” the groups.

Like any voluntary interest group, there are leaders and followers within both platforms – and many follow both Reddit and Twitter.

These people will act as moderators and commentators, organizing and directing the flow of the posts and making sure the contributions comply with the rules covering the participants’ behavior.

Digital Shield

As with all things on the Internet, it is tough to confirm the qualifications, experience, and voracity of those who seem to know what they’re talking about and freely give opinions and advice.

Aside from profanity and pornography and outrageous libel and slander, the platforms themselves are not obliged to police the discussions within the various groups.

This is both the attraction and the most off-putting aspect of Twitter and Reddit.

With Twitter membership at 353 million users and Reddit slightly behind at 330 million users, if a particular idea, like dogecoin, catches on and becomes viral, the platforms can exert a lot of influence simply by the numbers involved.

The “star power” behind influencers on social media platforms like Instagram, although not so prevalent on either platform, Is still something that needs to be considered when looking at investment advice and ideas. Due diligence is something that we cannot emphasize enough.

Crowned by the people

Fully 48% of respondents in a survey by Statista use Twitter primarily as a news source. Following brands and companies was why 33% use it, and strengthening their professional network was why 14% use it.

Rather than being a news source, Reddit is more of a place to discuss the news you have already gleaned from other sources. It is more like a debating society. The average length of time readers spend on Reddit is 16 minutes. By contrast, the average length of time spent on Twitter is 3.39 minutes.

These time differences would tend to confirm that Twitter is used as the decision-maker on news – and Reddit is used as confirmation or repudiation of the ideas gleaned from Twitter.

Twitter is built on short bursts of information that are limited to 140 characters. Because of their short duration, the service is often used to obtain and transmit information quickly.

On the downside, the information is delivered in a torrent format with no categories, and the only way to distinguish between it is to look at who is posting it. As a result, if you just follow Warren Buffett’s blog, you will only see updates from his account.

Reddit, like the Huffington Post, is a platform that aggregates content. It compiles its data from various sources and presents it to the public on a single website.

The most significant difference between Reddit and other social media platforms is that Reddit has “subreddits” where people can post webpages/information from various sources from all over the internet about very relevant or unique topics, like crypto, or gold, or silver.

You can also choose which subreddits you want to follow. So, unlike Twitter, you're not following individuals or accounts but rather topics of interest. For example, since precious metals are essential to us, we subscribe to the "Gold subreddit," which has 46,000 members.

Furthermore, unlike Twitter's stream, which can have trends, Reddit items are voted down or up by its members, so you get things that are arguably the most relevant/of interest within a subreddit.

Financial sentiment analysis allows us to understand the effect of social media reactions and emotions on the stock market and vice versa. 

Digitizing human emotions

In 2020, the world was rocked by the COVID-19 pandemic and global concerns related to health and the economy.

The most influential Twitter accounts were The New York Times, Bloomberg, CNN News, and Investing.com, presenting a high correlation between sentiment on Twitter and stock market behavior during the pandemic.

Twitter accounts showed reactions to financial market moves within a period of 0 to 11 days during the H1N1 pandemic.

“Sentic computing” is a recent line of research that is supported by computational techniques, neuroscience, sociology, psychology, and mathematics. 

It allows for the analysis of different data types to determine sentiment, emotions, or meaning of the content of big data. The potential for this type of artificial intelligence technique has extended to different fields, such as social media and finance, where sentic computing has been applied to find patterns of behavior.

Understanding emotions is one of the most important aspects of personal development and growth and is paramount to the emulation of human intelligence.

The processing of emotions is vital for advancing artificial intelligence and a task closely related to the detection of polarity and emotions.

Research on sentic computing and finance has grown, but very few studies have analyzed social media datasets during pandemics.

News shared on social media, whether true or not, can cause changes in the trends of stock market indices. This is especially true during crises such as H1N1 and COVID-19.

Shifting correlations of polarity generated by Twitter accounts do seem to influence the financial sector. The economic sentiment analysis of influential Twitter accounts does show correlations with the behavior of important financial indices.

The jury is still out on how much of an influence both Twitter and Reddit have on the markets – but research and analysis are beginning to show that they are becoming influential - in the way that the Wall Street Journal and Financial Times were to an older generation.

For good or ill both are here to stay - and both are “playing” their part.