Social media sentiment for Bitcoin has slumped to two year lows which is good for those wanting to go against the crowd. On-chain analytics provider Santiment asserts that Bitcoin and crypto assets tend to bounce when social sentiment indicates there is a lot of fear, uncertainty and doubt, which suggests that now is a buying opportunity.
According to its Bitcoin weighted social sentiment against price chart, this is exactly what is currently going on. Since its weekend lows, Bitcoin prices have recovered around 2.4% to current levels. It added that this is what has been happening since early September when markets plunged $60 billion in terms of total market capitalization.
“This is exactly what we've been seeing for #Bitcoin, #Ethereum, and many #altcoins following the early September” The analytics provider added; “Generally, the best buy opportunities in crypto come when the average trader is down, both psychologically and financially. This is what our metrics currently indicate,”
Following the early September slump, when there was also a lot of negative social sentiment, Bitcoin recovered around 12% to top out over $11k, and the same could happen again.
This latest plunge a couple of days ago has resulted in a much smaller drop off for Bitcoin prices with just 7.5% lost to its low of $10,300.
Santiment added that Bitcoin's weighted social sentiment on Twitter continues to hover around near two year lows indicating that there are a lot of doubters in the price level, keeping support at the mid-$10k zone. This would be good news for whales, the report added, which tend to go against the crowd.
There was a similar opportunity with Ethereum where sentiment is also close to two-year lows. The metric is derived using a machine learning model on a large Twitter dataset containing over 1.6 million tweets which are ranked as positive or negative.
The analytics provider also referenced another metric called MVRV which is a ratio that calculates the average profit and loss of different holders to determine whether a coin is currently over or under bought. It indicates that more people are currently down which could be a good entry point as there is an average return of negative 3.5% for traders over the past 30 days.
Additionally, the Bitcoin Fear and Freed Index has now dropped into the fear zone at 43 which confirms the findings.
Trader and Blockroots co-founder, Cantering Clark, stated that the current situation could be shaping up as a bear trap and Bitcoin could be seeing relief in the near future;
“If you ask me, that looks like an optimal way to set up a trap for any systematic shorts that would get the green light at that point.”
Bitcoin investor Lark Davis says that regardless of what crypto markets are doing, September is usually a bad month for stock markets and Bitcoin’s correlation could lead to some rocky weeks ahead; At the time of writing, Bitcoin was trading at $10,500, up 0.5% on the day but down 2.7% on the week.
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