The current sentiment among Bitcoin investors may hold the key to understanding whether the current drop is a buying opportunity or not.
“Buy The Dip” Optimism Is Fading In The Bitcoin Market
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First, the analytics firm has checked for the amount of “buy the dip” types of calls that have been happening on social media recently.
Here, Santiment has made use of its “social volume” metric, which finds the unique number of social media posts that are making mentions of a given term or topic.
Naturally, the social volume for Bitcoin/cryptocurrency is taken here, and has then been filtered for terms like ‘buy’ and ‘dip.’ From the chart, it’s visible that the social media users were participating in some heavy discussion around such topics just when the Bitcoin crash toward the $26,000 level occurred a few days ago.
This implies that the traders were optimistic that the asset would quickly recover and they believed that the drop presented an ideal buying opportunity.
As the asset has only continued to move sideways since the crash, however, optimism on social media has appeared to have slowly vanished, as ‘buy the dip’ calls have plunged. However, this is not all bad news as Santiment points out.
“Believe it or not, it’s a good sign that people are no longer certain that this is a dip buy spot,” explains the analytics firm. “It means that pessimism is beginning to take over again as market caps fade.”
Historically, bottoms have become more probable to form the more pessimistic about the market the majority of the traders have been. Thus, this development can potentially allow the coin to recover.
In terms of the social volume broken across the major social media platforms, it would appear that Redditors have still not given up hope for a reversal.
While the overall market sentiment may have cooled down, it would seem that it hasn’t yet happened on all platforms equally. But it may provide a unique opportunity for a good entry point.
“When all four social platforms align and have settled back down to neutral mentions of buying the dip, this is when the actual opportunity has historically presented itself for patient traders,” notes Santiment.
A sign that may not be so positive can be the fact that the “social dominance” of Bitcoin, the percentage share of the total social volume of the top 100 assets, has dropped back to normal levels, after briefly hitting the highest level of 2023 following the crash.
This would mean that social media users are still engaging in discussions related to altcoins, which is a sign that there is still greed left in the market. Ideally, the Bitcoin’s social dominance should remain high.
“High discussion related to the #1 asset coincides with fear, whereas discussions about more speculative assets tends to coincide with greed,” says the analytics firm. “Fear is when markets rise.”
Overall, it would appear that the market sentiment is moving in the correct direction, but it hasn’t yet completely aligned in a way that has historically been favorable for a Bitcoin rebound to occur.
At the time of writing, Bitcoin is trading around $26,000, down 11% in the last week.