Santiment's In-Depth Exploration of Trader Sentiment After Bitcoin's Plummet

In a recent blog post, Brian Quinlivan, Director of Marketing at blockchain analytics firm Santiment, explores the intricate shift in trader sentiment following Bitcoin’s significant drop to $26.1K. He begins by acknowledging that traders of all experience levels are prone to emotional reactions, emphasizing that sentiment continues to drive markets, especially in the wake of substantial price changes.

Quinlivan notes a substantial rise in “buy the dip” mentions across social platforms, indicating initial high trader optimism for a quick market recovery. However, this optimism has waned considerably, signaling growing pessimism as market caps fade. Interestingly, Reddit was the community most optimistic about prices recovering quickly, while Twitter returned to a neutral stance.

When all four major social platforms align and settle back to neutral mentions of buying the dip, historical opportunities have often presented themselves for patient traders. The percentage of discussions related to Bitcoin spiked to its highest level of the year following the market crash. Quinlivan prefers high Bitcoin social dominance, as it usually correlates with thriving and healthy crypto markets. High discussion about Bitcoin coincides with fear, while discussions about speculative assets tend to coincide with greed.

Quinlivan says swing traders are experiencing significant pain, with average 30-day returns of -8.5% among active addresses. However, long-term 365-day active traders are apparently still slightly in profit at +5.2%. He points out that when both short and long-term MVRV’s are negative together, it signals a strong bullish trend.

Quinlivan finds it encouraging that a large number of shorts remain open on exchanges, the most seen in over three months. This has resulted in flat price returns so far but often leads to a rise to scare away shorts and neutralize funding rates.

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