It’s possible that a trader might be able to judge whether to buy, sell or hold crypto assets simply by assessing the mood on social media. There is, of course, a famous tool that purports to summarize emotions for you, the Fear and Greed Index. And, technical analysis is also, at its core, a mathematical mapping out of past market sentiment (behavior in the markets being, after all, action resulting from mass scale changes in people’s feelings).
Would it be viable, then, to assess what your next move should be simply by looking at, for example, crypto Twitter, rather than by checking price charts and their indicators? Certainly, with the benefit of hindsight, the previous bitcoin top should not have been too difficult to catch, as long as you were aware of one complicating feature: when actually at the top, a euphorically bullish sentiment will result in a lot of people insisting that the best is yet to come.
And so, last year, it played out that way, as a narrative caught on that the price of bitcoin reaching 100K was all but certain, that the higher prices rose, the firmer ultra-bullish theories became, and that the cycles never failed. Never mind that the cycles could hold perfectly well without BTC hitting 100K, and that near-69K was a very strong level to reach at this phase in bitcoin's lifetime anyway.
It is sometimes remarked that when crypto accounts start posting images of the cars they have bought with their profits, this is a flashing signal that we’re at or beyond the top of a cycle. That is an over-simplification, but still, over in the NFT section of Twitter there was, for a while, no shortage of boasting (or humble-brag rags-to-riches stories) about the gains that JPEGs, especially Bored Ape Yacht Club JPEGs, had brought to their owners.
It’s fair to say that euphoria and the thrill that profits release are relatively easy to pick up on, and yet still the importance of these markers is disregarded by many crypto market participants, who will simply ride the rollercoaster back down. This too, though, is inevitable, since to disembark at the top, you must give your seat to someone else.
Current Sentiment Still Bearish
It’s instructive to discern what kind of mood has taken over now, half-way through 2022 and, it seems, deep into the bear. The overwhelming question being publicly articulated is, have we hit the bottom yet? Or more specifically, has BTC formed a bottom, since the leading cryptocurrency is what almost everything else will follow.
While no-one knows for certain the answer to that question, it is of note that the dominant mood has been pessimistic. That is, most people appear to think that the bottom is not yet in, and there are deeper lows to come. This might at first look like a bearish parallel to the bullish misconception that greater highs were due to arrive last year, but there is a difference. Last year’s 100K predictions were presented as something that was programmed and inevitable, whereas most current suggestions of deeper lows come with a reasonable degree of uncertainty and hesitation.
Strangely enough, uncertainty and hesitation can sometimes suggest that the possibility in question will actually happen, as by contrast, it’s at times unchecked over-emotionality, whether that be exuberant joy or despondent capitulation, that a turnaround might be on the cards.
That said, more excessive articulations of fretful doom-wallowing can be found, but tend to emanate from commentators who assess the macro-environment and steer heavily into politics and the culture wars. While there are certainly issues to be concerned about, a global deleveraging event, for example, wild-eyed predictions of total economic apocalypse come across as increasingly overblown, and more than a little paranoid.
Positive Developments among the Noise
There is good news to temper harsh pronouncements from catastrophe merchants, and while it’s almost become a cliche to talk about building through tough times, it is true: the bear market is when the seeds of long-term value are sown, creativity unfolds away from the spotlight, and, for investors, bargains can be scooped up.
In particular, the web3 transition continues and developer activity powers on. Notably, Ethereum just successfully completed its Ropsten testnet merge, pushing us a step further towards its full shift to proof-of-stake. Crypto being crypto, it would be unsurprising if Ethereum’s upgrade coincided with the ETH price dipping further, but either way, the Merge is an event that has been a long time coming, and if it actually happens, it will be a milestone achieved.
Over at Cardano, the development roadmap is being navigated steadily, and the next step is the Vasil hard fork, which is due to take place on June 29th. This upgrade should enable improved scalability for Cardano, ensuring that it continues its steady growth as a competitor to Ethereum and other smart contract platforms.
And, in what looks like a highly significant development for the entire cryptocurrency space, two US senators have introduced a crypto bill outlining proposals to regulate digital assets in the US.
The Responsible Financial Innovation Act, from Senators Cynthia Lummis and Kirsten Gillibrand, has been interpreted as being pro-crypto, and is welcomed by many in the crypto industry, although it is still at a very early stage and is likely to be revised and reshaped as it passes through Senate hearings on the way to a full vote. Unmistakably, though, we are now clear of the days when crypto was regarded by politicians as something to be either banned or dismissed.
Returning to the original point, about reading market sentiment and, perhaps, counter-trading it, online calls for a total meltdown, of both crypto and the wider economy, may not have reached their most forceful crescendo yet, but the louder they are, the more off-kilter they seem. Besides which, even among the chaotic noise of the daily news churn, the crypto industry as a whole presents no shortage of creativity and pragmatic forward-thinking.
