Emily Walker
Today, Bitcoin has experienced a significant drop, undoing its recent Christmas rally gains. This decline may have been hinted at by sentiments expressed on social media.
Social Media Enthusiasm Drove Recent Bitcoin Surge
On Christmas, Bitcoin nearly reached $100,000, but within a day, it faced a sharp downturn, falling toward the $95,000 mark.
As with any market drop, various factors play a role, and one likely contributor is the sentiment shared among traders on social media.
When BTC surged recently, the analytics firm Santiment provided a chart illustrating social media reactions to this rally. Their analysis focused on the metric known as “Social Dominance.”
This metric tracks the share of social media conversations surrounding the top 100 cryptocurrencies related to specific terms or topics.
Santiment measures sentiment across major social media platforms by analyzing posts that include Bitcoin and various price targets, specifically $90,000, $100,000, and $110,000.
During the recent rally, discussions about the $90,000 target indicated bearish sentiment, while mentions of $100,000 signified a neutral outlook. In contrast, references to $110,000 suggested bullish enthusiasm.
Below is a chart depicting the Bitcoin Social Dominance trend for these terms throughout the past month:
The chart shows a notable spike in the Social Dominance for the $110,000 target during the rally, indicating that social media users were very optimistic about Bitcoin’s potential to reach new all-time highs (ATH).
Historically, Bitcoin’s price often trends contrary to public sentiment. As traders become more confident in a certain direction, the likelihood of an opposing move increases.
While some level of optimism can be beneficial for a rally, excessive enthusiasm may heighten the risk of a price reversal. The chart also shows that the Social Dominance for this level peaked twice earlier in the month, each time preceding a decline in BTC’s price.
Considering historical patterns, it’s not surprising that this recent rally failed after traders became overly excited about its potential.
Current BTC Price
As of now, Bitcoin is trading at approximately $96,100, marking a nearly 4% decrease over the past week.