Bitcoin has rebounded above the $43,000 level over the past day. Possible reasons for asset reversal include:
Bitcoin rebounds towards $43,000
Just before that, Bitcoin fell to a low of $40,500 as the market experienced significant selling pressure. However, in the past day, BTC has already rebounded, recovering above the $43,000 level.
The chart below shows the roller coaster the cryptocurrency has been through over the past few days.
Looks like the price of the asset has sharply surged during the past 24 hours | Source: BTCUSD on TradingView
As is usually the case, other assets in the sector followed the original cryptocurrency’s lead and saw their own surges.
This sudden market-wide surge resulted in massive liquidation on the futures side, as shown in the table below.
The total amount of futures liquidations in the last 24 hours | Source: CoinGlass
Naturally, short selling took most of the hits in this massive cryptocurrency liquidation event, as $95 million of the total $126 million came from holders of these types of contracts. Bitcoin short selling alone contributed approximately $41 million to these liquidations.
So what is causing this sudden market revival? Data shared by on-chain analytics firm Santiment could perhaps provide some hints on this.
Cryptocurrency Traders showed very negative sentiment before the rebound.
According to Santiment’s new explanation: post Cryptocurrency traders at The metric of interest here is “weighted sentiment,” which is based on two other metrics: sentiment score and social volume.
The sentiment score measures the sentiment shared by the majority of traders across major social media platforms. To distinguish between positive and negative emotions, the metric uses a machine learning model trained by an analytics company.
Another relevant metric here is “social volume,” which tracks the total amount of discussion about a specific topic on major social media platforms.
Now what Weighted Sentiment does is it takes the Sentiment Score and compares it to Social Volume. This means that the value of the metric only spikes when the two sentiments lean towards one side and discussions about these platforms become more lively.
Below is a chart showing Bitcoin weighted sentiment trends over the past few months.
The value of the metric appears to have been quite negative in recent days | Source: Santiment on X
Historically, Bitcoin price has tended to go against public expectations. Looking at the graph, it is clear that the highs coincide with Weighted Sentiment, which indicates very positive values (i.e. a surge in FOMO among traders).
Likewise, an indicator to observe a very negative spike is when a bottom has formed. As you can see in the chart, FUD has captured the hearts of investors as Weighted Sentiment has plummeted since the recent asset crash.
Once again, the price of the cryptocurrency appears to have risen on the back of fears among investors, with the recovery contrary to the sentiment held by the majority.
Featured image by André François McKenzie on Unsplash.com, chart by TradingView.com, Santiment.net