On April 13, Twitter (now officially known as X Corp.) announced a new partnership with online trading platform eToro that will enable the trading of stocks and cryptos via social media. When Twitter users see others tweeting about a particular cryptocurrency, they can essentially just hit a button and they will be transferred to the eToro platform to make a trade for that crypto.
The move has the potential to shake up the world of stock and crypto trading. By some estimates, there are 4.7 million searches each day on Twitter for companies and cryptos using the social media platform's "cashtags" feature.
Even if crypto only accounts for about 20% of those searches, that's still 1 million searches per day. That could increase crypto trading volume significantly. So which cryptos stand to benefit the most?
1. Cryptos that are social media darlings
The biggest impact will likely be seen with cryptos that get a lot of heavy social media buzz, such as Bitcoin (BTC -0.24%) and Dogecoin (DOGE +2.90%). The former is already the world's most popular crypto in terms of market capitalization, and it's almost impossible to spend any significant time on Twitter without seeing mentions of it in your social media feed.
Bitcoin already accounts for 46% of the total crypto market cap, and that percentage is likely to rise in the aftermath of the Twitter deal.
Image source: Getty Images.
Dogecoin is another big social media darling, and has become the personal favorite of Elon Musk. It's easy to see how Dogecoin could become the poster child for what's possible with the Twitter-eToro partnership.
Already this year, Musk has taken a number of steps to promote Dogecoin on Twitter, even going so far as to temporarily swap out the iconic bird logo for the Shiba Inu dog mascot of Dogecoin.
2. Cryptos with loyal fan and developer communities
The next big category of coins that might benefit from this Twitter deal includes cryptos with loyal fan and developer communities. One example is XRP (XRP +1.35%), formerly known as Ripple. Right now, XRP is engaged in a legal battle with the Securities and Exchange Commission, and Twitter has become the go-to place to find out the latest twists and turns in the case.
The followers of XRP even have a name ("the XRP Army"), and they can have tremendous online clout in shaping the narrative around the crypto. On any given day, you can find hashtags such as #Ripple and #XRP trending on Twitter.
CRYPTO: XRP
Key Data Points
But there are other, less speculative cryptos that also have loyal developer communities. For example, all the top Layer 1 blockchain networks -- such as Ethereum (ETH +0.51%), Solana (SOL +3.30%), and Cardano (ADA +3.08%) -- have extensive worldwide communities and fan bases. These also stand to benefit from the Twitter deal. As long as fans and developers are tweeting about them online, it increases the likelihood that other Twitter users will trade them.
3. Momentum cryptos and meme coins
The problem, however, is that social media influencers and online shills can use Twitter as a playground to pump up the price of coins and tokens that could have very little underlying value. Crypto is still the Wild West in this regard.
Even though the SEC has taken some steps to shut down crypto pump-and-dump operations, they still exist. The typical scam involves a crypto with amazing momentum, a very low price, and almost unlimited upside potential.
Other watch-outs include tokens that sound a lot like popular coins, but are actually worthless. Social media influencer Kim Kardashian got into trouble for this with the SEC, which led to a highly publicized $1.26 million settlement in October. Kardashian thought she was promoting Ethereum (which currently trades for about $2,090), but she was actually promoting something called EthereumMax (which currently trades for $0.000000001979).
Investor takeaways
My primary concern is that the Twitter deal is going to change the way people invest in digital currency. Crypto investing, already heavily focused on short-term profits, could become even more focused on the short term.
Instead of concentrating on cryptos that have solid long-term value, investors are going to focus on those that are showing immediate price action. After all, it's only fun to show social media followers a trading chart if a crypto is rocketing to the moon. In addition, people might be tempted to buy coins just because they are trending on Twitter or because Musk is tweeting about them.
At the end of the day, I think the Twitter deal will be good for crypto, mostly because it will make trading more mainstream, and will help bring crypto to the masses.
As long as you keep a long-term mind-set and stick to digital coins with strong fundamentals, checking in on what's happening on Twitter from time to time could be another way to make you a better crypto investor.
