- Bitcoin sentiment plummeted yesterday, with many large accounts all capitulating
- It isn’t clear what prompted the mass sentiment suicide, as price is still within a key range despite falling again
- The China news was unlikely to have been a factor, although it may have contributed
Being able to read market sentiment is a key component of any trader’s arsenal, regardless if they are a long- or short-term trader. Knowing how the masses are feeling is a very useful tool, as very often price does the exact reverse of what the overall sentiment believes. Throughout the crash from $65,000, sentiment on Bitcoin has been by and large, positive, or at least neutral, but for some reason yesterday saw a massive negative shift in sentiment toward Bitcoin, with many of the most popular accounts flipping from bullish or neutral to more often bearish. This is despite Bitcoin’s price action doing nothing to warrant such a bearish reversal in tone. So what caused this sudden mass change in attitude?
Did China FUD Cause Bitcoin Bears to Appear?
The sentiment shift came on the same day that the People’s Bank of China told banks and payment processors to take more steps to root out cryptocurrency users, resulting in a posted and then hastily withdrawn message from AgBank, China’s third largest bank on the matter. This ‘ban’ wasn’t anything new however, merely an extension of a 2013 order, although the narrative helped to drop the price further.
Given that the crypto community is well versed in China FUD, this news is unlikely to have triggered a widespread sentiment change, especially among those who have been in the space for a while.
Did Bitcoin Price Shift Sentiment on its Own?
Could it have been purely price action then that caused the ‘buy the dip’ brigade to finally abandon all hope? Since rejecting the key area of $41,000 Bitcoin has certainly been trending downwards, hitting $31,165, with every potential mini-bounce being rejected on the way down.
If all these traders had longs open then this could explain why they all felt dejected at the same time, but the fact is that Bitcoin is still working within the key $30,000 to $41,000 range that it has been since it first hit $31,000 over a month ago.
Nothing has changed from last week in terms of price outlook, which was why it was surprising to see the ‘it’s over’ message being broadcast so loud and clear before price has fallen through that crucial floor. This isn’t of course to say that it won’t and these individuals won’t all end up being right, but yesterday really felt like someone had put negative sentiment juice in the crypto waters and everyone was taking a drink.
Until Bitcoin falls through and closes below that $30,000 floor nothing is certain, yet yesterday’s shift in sentiment felt seismic. Let’s hope price is going to do what it usually does when everyone is thinking one way.