Is Herd Mentality Driving Crypto Markets? Blockchain Tracker Santiment Analyzes Crowd Psychology Behind Bitcoin and SHIB
As crypto markets turn green again, blockchain analytics platform Santiment takes a look at how crowd psychology can affect price runs, and how it can foreshadow price tops.
With memecoin Shiba Inu (SHIB) currently up 387% in the last seven days, Santiment notes how mentions of SHIB on social media have skyrocketed to number one on their social trends tracker.
Also within the Santiment's top ten mentions are "Shiba", "Doge", and "meme".
"Generally speaking, when we see assets hit the top three or even just the top 10 in general for reasons related to price rises, that's generally the sign of at least a temporary stoppage point in that rally, sometimes even a reversal which people need to be concerned about. So obviously Shiba has not come back down to earth I should say but it's at least evened out at the time of this recording, with both its hashtag as well as its full name in the "1" and "3" positions respectively. That's going to be a sign that the crowd has discovered officially that this asset is on a major roll and a lot of FOMO is occurring, people are getting into it."
SHIB exploded on Monday following a tweet from tech billionaire Elon Musk, and though Santiment's data hints SHIB may not have much gas left in the tank, the rally hasn't stopped yet.
Santiment can also keep track of when people say "buy the dip" on social media. Unfortunately for dip-buyers, Santiment says when mentions of "buy the dip" become rampant on the internet, price usually keeps on dipping.
"There's also things like 'buying the dip' or 'buying dips'. When these types of things are mentioned, usually the opposite expectation happens. So when a really obvious 'buy the dip' opportunity happens for the crowd, it's almost a self-fulfilling prophecy where that isn't yet the dip to buy until the crowd becomes disinterested in buying the dip again and that's actually the opportunity to buy the dip."
The exact same phenomenon can be observed when people attempt to short the crypto markets.
Santiment suggests that Bitcoin's rally from the $30,000 range up to $55,000 was largely fueled by market wide skepticism and fear, and that many dips are triggered by euphoria and optimism. According to the firm, Bitcoin's general social sentiment has flipped positive again, but nowhere near the extremes seen shortly before the collapse in May.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.