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The data shows that sentiment in bitcoin turned quite bearish shortly before the price of the asset bounced off the $27,100 level.
Bitcoin bounces back shortly after FUD takes over the market
According to data from network analytics company Santiment, investors showed a high level of fear during the local bottom during the past day. The relevant indicator here is “social volume,” which measures the total number of social media text documents that mention a given topic, such as cryptocurrency or bitcoin.
These social media text documents include various sources such as Reddit, Twitter, Telegram and other forums. Social volume only tracks how many such documents mention the term at least once. That is, it means that even if the post contains the keyword several times, its contribution to the social volume will still be only one unit.
The significance of social volume lies in the fact that it tells us about the volume of discussion of certain topics by participants in social networks at a given moment.
In the context of the current topic, social networks are used to find out the degree of bearish and bullish sentiment in the market. Here is a chart that shows the trend of these social volumes for Bitcoin over the past week:
Bearish sentiment seems to have intensified recently | Source: Twitter Sentiment.
To separate the social scope of the discussions implying bullish sentiment, terms such as “buy, bottom, bullish” were chosen, and keywords such as “sell, top, bearish” were chosen to accurately define bearish sentiment.
As shown in the chart above, Bitcoin’s bearish social volume appears to have rallied strongly over the last day. This indicator spike came after BTC dropped from $28,000 to around $27,100.
This suggests that BTC investors got very scared during this panic selloff. A similar level of bearish sentiment was seen just a couple of days ago, as shown in the chart.
The turnaround in the market mentality then also occurred after the fall (this time from $29,000 to the lows of $27,000), and interestingly, it coincided with a local price bottom.
The surge this time also came at the same time as a possible local bottom formation at $27,100 as the price of the cryptocurrency has recovered slightly since then.
Historically, whenever the market was of an opinion that was too unbalanced in any particular direction, the price tended to move against that opinion of the masses. Because of this, at times when the market has seen more greed, a local top has usually become more likely.
Naturally, the same applies to local bottoms, as they usually form when FUD takes over the minds of investors. The recent surge appears to have been an example of this pattern, and so far it looks like the latest bearish surge may be the same.
At the time of writing, Bitcoin is trading around $27,500, down 5% from the last week.
BTC seems to have been moving sideways in the past few days | Source: BTCUSD on TradingView