Posted: 27.07.2021 | 07:50
What is Cryptocurrency Market Sentiment?
Market sentiment is the collective behavior of traders and investors towards a financial asset or market. This concept is present in all financial markets, including cryptocurrencies, and market sentiment has the power to influence market cycles.
In addition, positive market sentiment does not always lead to favorable market conditions. Sometimes positive movements can be seen before a market correction or even a bear market.
In addition to gaining an idea of market demand, traders can use analytics to forecast trends whose sensitivity has the potential to profit. Market sentiment may not always take into account the key features of a project, but the two can sometimes be linked. Many cryptocurrencies or tokens can be given as examples (eg: dogecoin, xrp, etc.).
Importance of Market Sentiment Analysis
Market sentiment analysis is one of the most fundamental parts of many trading strategies. Similar to technical and fundamental analysis, decision making taking into account all available information is generally accepted as the right approach.
As an example of this situation, market sentiment analysis can help you examine whether the FOMO is due to a reason or simply the result of herd psychology. In general, combining technical and fundamental analysis with market sentiment research allows:
For analysis, you can have more insight into short and medium-term price movements.
You can better control your emotions when making decisions.
You can spot opportunities with potential profit potential.
How is Market Sentiment Analysis Performed?
To understand the sentiment of the market, you need to gather all the views, opinions and perspectives of market participants. While this information can be useful, you should not rely solely on market sentiment analysis. It would be more accurate to reach a total by adding this information we have obtained on top of your existing knowledge and experience before making practical decisions.
You can try to understand how the community and investors feel about a particular project by reviewing the relevant social media pages and channels to get a general idea. You can also join official forums, Discord servers or Telegram groups to communicate directly with project team and community members. But you have to be careful! There are many scammers in these groups. Don't trust everyone and always do your own research before taking risks. Social channels are only the first step. You can use many methods to get a broad perspective on market sentiment. Apart from following social channels (especially Twitter, given its popularity among cryptocurrency fans), you can also:
While many traders use market sentiment analysis in investment markets, this analysis can be particularly useful in cryptocurrency markets. Because the blockchain industry and crypto markets are still relatively small, public perception and sentiment can cause price fluctuations.
By using the methods discussed in this article, you can begin to better understand market sentiment and begin to make better investment decisions. If you want to start doing market sentiment analysis, you can alternatively apply the methods below.
You can follow social media channels and how comments are made about a project. You can follow the updates by learning the latest industry news and upcoming events by doing news research.
You can also analyze using indicators to get a better idea of how much interest the general public is showing in a particular coin.
Market sentiment analysis will yield better results as your practice and experience increases. However, this may not work in some cases. Since all decisions involve some degree of risk, you should definitely do your own detailed research before trading or investing.