Manually gauging Cryptocurrency Sentiment

This type of sentiment/market mood collection is far more objective than subjective when compared to methods listed above. Here, look online in the local discord/telegram/reddit/other platform community that you typically participate in.

 

Look for:

  1. How do other traders feel about Bitcoin currently? 
  2. Are many people elated and posting about how well they are doing? 
  3. Are many people posting charts of the market rising or falling?
  4. Are more or less people talking about Bitcoin at the current moment?
  5. Are you hearing people say phrases such as ‘Bitcoin is dead’ or ‘you’d be a fool not to put money in Bitcoin’? 

 

As a rule of thumb, when you notice many traders going to one side (bearish or bullish) in a polarizing fashion, it’s typically a strong strategy to look to trade against them.

 

This type of thinking does not always work well in the short-term, but it can certainly work wonders in the medium-and-longer term. The reason for this is due to how hard it can be to time the market when you notice exuberance or market depression. 

 

When Bitcoin is aggressively soaring and traders are exuberant, you might sell and then might notice that price continues to soar higher in the short-term. Know that this is 100% fine, expected and in line with the strategy outlined throughout this course. This is because what typically happens is that when Bitcoin is in a state of exuberance, it can be very difficult to pinpoint a market top.

 

However, when the exuberance fades Bitcoin can easily go into a bart-like pattern, wherein it falls so rapidly that late buyers can’t even react to sell above breakeven. Although, you will find yourself ahead of the curve because you have already sold. 

 

This type of trading strategy has a sample size weakness, wherein if the community that you are analyzing is say only a few dozen opinions — that might not be a strong enough sample of the larger trading population. 

 

Whenever you catch yourself thinking that the market is ‘guaranteed’ to do something, instead of assigning heightened or lowered probabilities stop yourself and reevaluate. Almost nothing in life is 0% or 100%, black or white: the markets are no different. 

 

Finally, let’s take a look at this classic depiction of the emotional cycle of a trader. It is incredibly important that you take a look at this whenever you are feeling any type of extreme emotion when it comes to your BTC spot trading. 

 

The absolute best time to sell tends to occur when you feel incredibly uncomfortable about missing the uptrend. 

 

This is because at the very top of a market cycle, you will tend to feel very uncomfortable selling. You may ask yourself, “Why should I sell when my portfolio increased by 4000 USD and 2000 USD the day before? The market will keep grinding higher anyway and I will look back and call myself a fool.” 

 

However, the reality is that too much comfort can be a sign of the overconfidence stage of a market cycle. And that tends to be the calm before the storm. Essentially when no one is worried about the market falling, be worried. 

 

The absolute best time to buy tends to occur when you feel incredibly uncomfortable about buying Bitcoin and many in the market give it a near guarantee that prices are going lower. 

 

This is because at the very bottom of a market cycle, you will tend to feel very uncomfortable buying. Others around you are very likely to say, “Bitcoin is guaranteed to fall. Why would you buy it?” They might also call crypto dead or point to a recent string of bad news. Price will be crashing and it will seem as if the market is in a race to zero. However, this is typically what occurs during the final stages of a downtrend during the capitulation phase. 

 

Finally, below are a few clear signs of when an uptrend is likely to continue and conversely when a downtrend is likely to continue. When price is moving higher, read the uptrend section below. When price is moving lower, read the downtrend section below.

 

Uptrend that is likely to continue higher

  1. Traders on Twitter and other social media platforms are talking about how they are waiting on the sidelines or have already sold
  2. You sense a collective belief that the market will soon pullback lower
  3. Not that much buzz and conversation about Bitcoin (extreme greed/FOMO hasn’t set in yet)

 

Downtrend that is likely to continue higher

  1. Traders on Twitter and other social media platforms are talking about how they are very bullish and ‘bought the dip’
  2. You sense a collective belief that the market will soon move higher
  3. Not that much buzz and conversation about Bitcoin (extreme panic hasn’t set in yet)

 

Personally, the strongest unilateral signal of a trend’s continuation is not fear or greed but rather can be read by how confused the masses are about any given trend. It’s quite a strong sign that a market will continue rising when news outlets, social media influencers, and the general public states that they are ‘confused’ as to why the market is rising despite the factors that they will state. This ‘confusion’ is showcasing that the overall public has not bought yet and that the trend will continue. Same goes for downtrends.

error: