While the world of crypto trading is usually seen as a place beyond human emotions, a place heavily dictated by data and numbers, it is actually quite far from reality. Apart from all the logical and proof-backed data, there is one other factor – Market Sentiment, that dictates the price movements of the crypto assets.
What Is Market Sentiment?
Market Sentiment comprises how various stakeholders in the crypto market perceive the future of the market in general or some crypto asset in particular. It might just be a hunch, untrue and unbacked by any logical analysis, but if a good enough number of people feel the same, it comes to prevail.
Professional investors and traders use Market Sentiment Analysis to analyze such underlying emotions that people have about the market in general and assets of interest in specific, use these stats to create best cryptocurrency trading signals.
Factors affecting market sentiments –
- Any Major Event
- Journalistic Coverage
- The mood of the investors
- Other Investment Opportunities
How are Market Sentiments Important?
Market sentiments exist in all financial markets and have an essential role in the underlying business cycles. These might have some co-relation with some fundamentals involved but are primarily driven by emotions, thoughts, gut feelings, and market hypes. Just as in any market, price is a play between the demand and supply of an asset. It gets influenced by public sentiment followed by any impactful event.
However, not everyone’s sentiment affects the market equally. A recent surge in the Dogecoin price happened due to a hype created around it with the tweets of Elon Musk. A mention by Musk led the investors and traders to read in between the lines creating a high demand for the coin. The price later dropped when the market sentiments ran out after a while. Thus, Market Sentiments are far more impactful on the short-term price trends as people often jump ships due to their hysterical fear of missing out.
How to read the market sentiments?
Market Sentiment Analysis is an indispensable part of analyzing trends and is as critical as Fundamental and Technical analysis to make accurate predictions. The Market analysis experts get a better view of the market emotions and also learn to keep their own in check.
Here are a few general tips to help you with analyzing the market sentiments:
- Get to know the market sentiment by investigating social media networks like Twitter, Telegram, Facebook groups, & Discord servers. Don’t trust anyone blindly and not everyone’s viewpoint matters equally. The opinion of the investors is most significant as they are the primary drivers of the market forces.
- Use Data Collection software to track social mentions of various cryptocurrencies.
- Setting alerts to track large transactions as such transactions have an impact on the market sentiments.
- Follow crypto news and blogs for keeping a constant tab on current events related to the crypto market.
- Keyword Research tools like Google trends can help give a fair idea about the popularity of a crypto asset.
- There are online services that display market sentiment indicators to give traders an idea about the general emotion. However, such services mostly only cover popular cryptocurrencies like Bitcoin and Ethereum.
Market Sentiments are a vital determinant of the price movements of crypto assets. However, such sentiment analysis should always be used along with Fundamental and Technical analysis. Expert traders and leading crypto signals providers like MyCryptoParadise use a combination of all three techniques to arrive at an investment decision.