The current problems in the cryptocurrency market lead investors to realize that there is no financial basis for projects. Yes, according to buidlbee, experts predict new cosmic Bitcoin value. There are marketing plans, promises, and so-called roadmaps, but the actual picture of the world economy does not correspond to them. If the world were at the stage of an active development phase, then cryptocurrencies would continue to grow, because many people would keep the sentiment to buy different coins.
If you are a beginner, then most likely you saw a new and incomprehensible word for yourself – sentiment. In this article, we will analyze in detail what the sentiment of the cryptocurrency market is and how it works.
Cryptocurrency market sentiment – what is it
The sentiment of the cryptocurrency market shows what (up or down) and how large-scale the movement is currently prevailing in the cryptocurrency market. In simple words, this is how investors and traders feel about a particular cryptocurrency. There are many applications that perform this analysis. Most of them show the sentiment of the cryptocurrency market for the last hour or the last 24 hours.
At the time of writing, only 25% of cryptocurrencies showed a fall, and 75%, respectively, an increase(per hour). This tells us that demand exceeds supply, that is, a growing trend in the cryptocurrency market.
However, do not rejoice, if you look at the mood of the market during the day, then only 13% of cryptocurrencies rose in price, which tells us that the cryptocurrency market is in decline, however, there was a slight rebound within the hour.
How does understanding the presented cryptocurrency market sentiment charts help us? Understanding the sentiment of the cryptocurrency market helps us figure out which direction to work speculatively, and which direction to wait.
Additionally, market sentiment analysis is a type of research that makes use of this data in an effort to forecast price changes. By observing market dynamics and participant attitudes, you may monitor the level of enthusiasm or fear surrounding a given currency.
How does cryptocurrency market sentiment analysis work?
To analyze the mood of the cryptocurrency market, artificial intelligence is used that processes natural words in order to analyze the feelings and opinions of people regarding a certain topic. Thanks to the analysis of artificial intelligence about the rise in prices, everything positive said in relation to a particular situation can serve. Conversely, a negative attitude to the situation will predict a fall in prices.
If we take cryptocurrencies as an example, then in order to get a sentiment analysis for a particular cryptocurrency, you need to collect a huge amount of information. These can be exchange boards and their comments, news, social networks, blogs, as well as forums, and articles.
It would be difficult for an ordinary person to do this alone. Therefore, artificial intelligence began to be used for these tasks, which will help to quickly assess positive, negative, or neutral sentiments.
Artificial intelligence looks for unexpected trends in sentiment indicators, monitors various sentiment signals, and, based on the information received, can detect what is being manipulated in the market. This is a very good help to investors.
Can you trust the sentiment of the cryptocurrency market?
Like everything in this world, cryptocurrency market sentiment can be useful, of course, if you know how to use it. But there are always exceptions, the uncertain nature of public sentiment, as well as opinions and views, tells us that there is no single correct system or model on how to accurately measure the mood of the cryptocurrency market. Always try to compare and in some cases even combine crypto market sentiment analysis with fundamental and technical analysis. This course of action will help you see a larger, broader, and better picture of what is happening.
Conclusion
Understanding what the sentiment of the cryptocurrency market is and how it works, helps a trader to have a fairly strong tool in their hands. This applies not only to cryptocurrencies but in principle to all investments – the more information you have, the better your understanding of the surrounding picture in the market. Analyzing the sentiment of the cryptocurrency market will help you create more accurate strategies that will help you not become a millionaire, but definitely not go bankrupt.
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