Data shows bearish sentiment has spiked among Bitcoin holders, something that could actually work in the favor of the asset’s price.
Social Media Users Have Turned Bearish On Bitcoin
As explained by the analytics firm Santiment, traders have come into the new week expecting the price of the cryptocurrency to retrace towards the $27,000 to $29,000 range.
The relevant indicator here is the “social volume,” which measures the total number of social media text documents that are making mentions of a specific term or topic.
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The text documents here refer to posts/threads sourced from various popular social media platforms like Reddit, Telegram, and Twitter.
Something to keep in mind is that the metric only measures the unique number of such documents, meaning that regardless of whether a post mentions the term one time or five times, the contribution towards the social volume will still remain one unit.
This indicator helps us gauge the amount of discussion that a topic is receiving across social media right now. It can also be used to measure the market sentiment if some specific terms are applied.
To separate the Bitcoin discussions related to positive and negative sentiments, Santiment has taken the total social volume related to the cryptocurrency market and has then filtered it using terms like buy, bottom, and bullish for the former, and sell, top, and bearish for the latter.
Here is a chart that shows the trend in the social volume of these terms over the past week or so:
The value of the red sentiment seems to have been quite high in recent days | Source: Santiment on Twitter
As displayed in the above graph, the social volume related to negative sentiment has spiked recently. The positive sentiment, on the other hand, has remained at low values.
This would suggest that the majority of the Bitcoin traders on social media are bearish on the asset and are expecting it to register a drawdown in the near future.
Historically, BTC has tended to show price moves in the direction that the average investor isn’t expecting. The more heavily the crowd leans toward any particular side, the more the probability of such a reverse price move taking place becomes.
From the chart, it’s visible that the bearish sentiment has seen multiple spikes during the last week as the latest rally in the cryptocurrency’s price above the $30,000 mark has occurred.
Interestingly, one of these surges in the metric happened right before this rally started. The local top so far, however, also coincided with such a spike, but it’s also true that the positive sentiment was also elevated during it.
As the bullish calls are silent right now while the investors are engaging in bearish talks, it’s possible that Bitcoin could show a rise soon and go against what the majority sentiment has been.
At the time of writing, Bitcoin is trading around $30,700, up 15% in the last week.
BTC has been mostly moving sideways recently | Source: BTCUSD on TradingView