The Abilene Paradox and collective irrationality in cryptocurrency markets: a social media sentiment analysis

Purpose- This study investigates the manifestation of the Abilene Paradox within the context of collective irrational behavior in cryptocurrency markets, utilizing social media data for sentiment analysis. The Abilene Paradox describes a phenomenon where a group collectively decides on a course of action that is contrary to the preferences of most or all individuals, as each mistakenly believes it aligns with the desires of others. In the highly community-driven cryptocurrency market, this paradox can exacerbate herd behavior and the Fear of Missing Out (FOMO), leading to significant market volatility. Methodology- Through sentiment analysis of discussions on social media platforms (e.g., Twitter, Reddit) concerning specific cryptocurrencies (e.g., Meme Coins), this research explores how community sentiment influences market behavior and price movements. Findings- The study considers the impact of community variables (e.g., community size, opinion leader influence), sentiment variables (e.g., positive/negative sentiment indices, sentiment polarization), and market variables (e.g., trading volume, price volatility) on collective irrational behavior. Conclusion- It aims to establish a generalized model explaining the relationship between social media sentiment and market behavior. The findings will contribute to understanding the behavioral economics characteristics of cryptocurrency markets and offer new perspectives for investors and regulators.