Data shows the Bitcoin sentiment on social media has turned the most negative since the COVID crash, indicating that the bottom could be near.
Bitcoin Weighted Sentiment Has Been Negative Recently
As an analyst on Twitter pointed out, BTC’s sentiment is in deep red right now. The relevant indicator here is the “weighted sentiment” metric from the on-chain analytics firm Santiment, which, as its name already suggests, hints about the general sentiment among investors in the cryptocurrency market.
To understand how this indicator works, two other metrics it’s based on must be looked at first. The first is the “sentiment score,” which analyzes social media posts on the major platforms with a machine learning algorithm to check whether the users are being negative or positive about Bitcoin right now and finds the total market sentiment in a score.
Naturally, the green values of this score imply that the net sentiment in the market is positive currently, while red values suggest the dominance of a negative mentality.
The other indicator of interest here is the “social volume,” which measures the total amount of discussion around an asset that social media investors participate in.
The sentiment is found in the weighted sentiment metric by weighting the sentiment score against this social volume. This means this metric would, for example, only show highly positive values when the market sentiment is positive. At the same time, there are also a large number of discussions happening on social media.
Now, here is a chart that shows the trend in the Bitcoin-weighted sentiment over the last few years:
The above graph shows that the Bitcoin-weighted sentiment has recently shown a large negative value. This suggests that many discussions related to BTC are happening on social media platforms, and the average sentiment contained in them is negative.
From the chart, it’s also visible that the current red values are more negative than any spike observed since way back during the COVID-19 crash in March 2020.
Historically, the Bitcoin price has tended to move in a direction that the crowd isn’t expecting. The probability of such price action increases the more the general investors lean towards one particular side.
The cryptocurrency also followed this pattern during the COVID-19 crash, where the deep plunge in the sentiment became a bottom signal for the price.
It now remains to be seen whether a similar pattern will also repeat this time as well and Bitcoin will form a bottom off the back of this poor market sentiment or not.
At the time of writing, Bitcoin is trading around $26,000, down 2% in the last week.