Data shows that Bitcoin investors aren’t displaying the “buy the dip” mentality, despite the cryptocurrency’s price registering a hit recently.
Bitcoin Market Isn’t Showing Any Interest In Buying This Dip
According to data from the on-chain analytics firm Santiment, the kind of FUD that’s present in the Bitcoin market right now has historically provided good opportunities for the asset.
The indicator of interest here is the “social volume,” which measures the total amount of social media text documents that are currently talking about a given topic or term (like the name of a cryptocurrency).
The text documents here are a collection of text-based posts that Santiment has amassed from some popular social media websites like Reddit, Twitter, and Telegram.
To know whether one of these posts is talking about a topic or not, the metric runs a check against the term and finds if there is at least one mention present in the said document.
The condition of being just one mention means that posts that contain the term several times still carry the same weight as one that does it only once. The reasoning behind this restriction is that it provides for a more accurate representation of the trend in the market, as a few users can’t easily skew the figure.
Now, here is a chart that shows how much of the total cryptocurrency social volume (that is, the discussions related to the sector) is being contributed by talks related to buying the dip:
The value of the metric seems to have declined in recent weeks | Source: Santiment on Twitter
As displayed in the above graph, the social volume for terms related to buying the dip has gone down recently, despite the price of Bitcoin observing a drawdown below the $27,000 level.
Back in March, when the asset had plunged below the $20,000 level, the indicator’s value had seen some spikes, but they were still at only moderate levels. When the price had recovered and had seen a sharp rally, however, that’s when the metric started to spike.
This would suggest that there was little enthusiasm in the market when the actual bottom formation was taking place, while the obstacles in the rally were being lauded as the time to buy.
A large amount of the spikes also occurred when that leg of the rally was topping out above the $28,000 level, meaning that the price went against the crowd mentality in this case.
Historically, Bitcoin has generally become more probable to move in the direction that the majority isn’t expecting, the more the majority predicts the other direction.
Since the social volume of these dip-related terms has remained low during the recent price decline, it appears that the investors are afraid of buying at the current levels.
“We are seeing the common paradox of traders buying short-term, small crypto price dips, but scared to buy the longer-term bigger ones,” notes Santiment. “Historically, this kind of FUD has been good to capitalize on.”
At the time of writing, Bitcoin is trading around $26,400, down 1% in the last week.
Looks like BTC continues to be stuck in the low $26,000 levels | Source: BTCUSD on TradingView
Featured image from iStock.com, charts from TradingView.com, Santiment.net