Can Crypto Rally Keep Up? This indicator can indicate that
Data shows that sentiment in the crypto market has turned less positive in recent days, which could allow the recent rally to extend further.
Euphoria doesn’t seem to have hit the crypto market yet
According to data from the analysis company at the chain Sentiment, positive sentiment has fallen in the market despite the price rise. The relevant indicator here is the “social volume”, which measures the total number of social media text documents containing a given keyword.
The text documents referenced here can be any number of things, such as tweets, Reddit threads, forum posts, Telegram messages, and more. These documents are counted on the basis of whether they mention the keyword at least once. If a document contains the term five times, it will still only contribute one unit to the social volume, not five.
In the context of the current discussion, the keywords of interest are those related to “crypto.” Santiment has calculated the total social volume of such terms and then filtered it for keywords that suggest what the general market sentiment is, to see if there are more positive or negative mentions related to digital assets at the moment.
Here is a chart showing the trend in social volumes for positive and negative crypto mentions over the past month:
Looks like both the metrics have seen a decline in their values in recent days | Source: Santiment on Twitter
To be more specific, to filter the social volume for positive sentiment, Santiment has selected only the cryptotext documents containing these keywords: buy, buy, bought, bottom, bottom and bullish. Similarly, the firm has chosen these terms to filter out the negative sentiment: sell, sell, sell, peak, peaked and bearish.
As you can see in the graph above, the social volumes of both positive and negative sentiment-related terms have declined over the past week, despite coins such as Bitcoin seeing a sharp rise in the period. This suggests that the discussion around the market has decreased recently.
Something to note, however, is that the decline in negative sentiment has been slower than in positive sentiment. This means that the two social bonds have moved closer to each other in recent days, suggesting that sentiment is moving towards neutral.
Following this shift in investor mentality, around 5.45% of total cryptosocial volume now consists of positive keywords, while approximately 3.81% contains negative terms.
Historically, asset prices in the sector have peaked when investors have experienced euphoria (that is, a state of very positive sentiment), while fear and disbelief have paved the way for price increases.
Since the market is clearly not experiencing high levels of positive sentiment right now, and on the contrary is observing the negative sentiment approaching the gap, there is an increased likelihood that the rally could continue further.
At the time of writing, Bitcoin is trading around $28,000, up 13% in the past week.
BTC continues to hang onto $28,000 | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, Charts from TradingView.com, Santiment.net