Bitcoin traders start the week with optimism, will it fire back?
Data shows Bitcoin traders have started this week with an upbeat sentiment, but here’s why this could backfire for the cryptocurrency.
Bitcoin investors show peak in bullish sentiment
According to data from the analysis company at the chain Sentiment, a large increase in trader optimism in BTC and the broader cryptocurrency market has recently been seen. The relevant indicator here is the “social volume”, which measures the total amount of text documents that mention a keyword or set of terms at least once.
Here, the text documents refer to a collection of text files on social media that Santiment has extracted from the internet from sources such as tweets, Reddit threads, forum posts, etc. The social volume indicator therefore tells us about the degree of discussions that are taking place around a given topic on social media- websites.
Something to keep in mind with this indicator is that it does not count the sheer number of mentions that occur of the term in question, but rather the number of documents/posts that contain it. This means that if there are two documents and one of them contains the keyword once, while the other does so twice, the social volume will still only be two here, and not three.
Now, here’s a chart showing the trend in social volumes of both positive and negative keywords related to the Bitcoin and cryptocurrency market over the past week or so:
The value of the metric seems to have spiked for positive keywords | Source: Santiment on Twitter
To get an idea of the positive sentiment in the market, the social volume for Bitcoin is filtered for keywords like buy, bottom, bullish, etc. Similarly, sell, top, bearish, etc. represent the negative sentiment.
From the chart, it is visible that the positive sentiment had cooled down over the past weekend and only a significant increase in the negative social volume took place.
However, with the beginning of this week, the social volume of the bullish sentiment has increased sharply, meaning that discussions taking place on the internet right now have a majority positive view of BTC and digital assets in general.
A particularly large increase in the indicator was observed yesterday, similar in scale to the positive sentiment increases seen on 27 and 29 March. The first of these came while BTC was already in the middle of a plunge, and the second appeared when BTC had almost hit a local top.
This means that none of these peaks seemed to have produced any bullish effect on the price. This is also something that has been observed many times throughout history, as too much positive sentiment can be a sign of euphoria among investors, which often ends up being bearish for the price.
If these past examples are anything to go by, the recent surge in positive sentiment could also have a similar effect on price. “Look for the crowd to get prematurely excited around $30,000,” notes Santiment.
BTC price
At the time of writing, Bitcoin is trading around $28,200, up 4% in the last week.
Looks like BTC has been moving sideways recently | Source: BTCUSD on TradingView
Featured image from Dmitry Demidko at Unsplash.com, Charts from TradingView.com, Santiment.net
