Market sentiments primarily govern price movements in any market. In the case of financial equities, the traders have complete knowledge through a financial report. However, the lack of metrics and data points in cryptocurrencies has made it depend solely on social media sentiments.
Joshua Frank, CEO of The Tie, recently commented on these issues based on his firm’s research and online metrics. The Tie provides for research, analysis, and management help, along with trading services. The firms’ research on fake trading volume was instrumental is confirming Bitwise’s report.
“The only thing that really moves cryptocurrency is still the wisdom of the crowd or pumps on Twitter.”
The number of crypto-related tweets has also seen a drastic change since Q1 of 2019. He reported that on June 26th, when Bitcoin reached its yearly high, the number of tweets exceeded 70,000. This is was last seen during the 2017 bull run. He said,
“Sentiments in and on itself predict the movement of the market. It is by far the best data point and best metric in crypto in order to explain all the movements or very significant percentage movements between the asset class.”
He took the recent example of the effect of the lunch postponement between Justin Sun and Warren Buffet. Tron plummeted almost instantly as the news started spreading. It went to the ultimate proportions when the Chinese media claimed that Justin might be detained in China for legal reasons. The price of Tron [TRX] exhibited the same roller coaster of sentiments through the days.
The number of tweets in Q2 was around 30,000 a day. In Q3 it is about 35,000. Since 2019, there has been a consistent rise in the tweet volume. He added,
“The continued increase in positive sentiment. Volatility and sentiment are at the lowest point in history. The sentiment is becoming increasingly and increasingly more positive.”
Moreover, as Bitcoin’s dominance is rising, the number same is replicated in the no. of tweets on it. The altcoins are being mentioned less. He pointed out that they are starting to witness a divergence between the tweets on altcoins and Bitcoins.
The research findings can be rather unsettling for a cryptocurrency trader. It essentially means that markets are only driven by hysteria and speculation. However, on the bright side, the sentiments have been mostly positive and spreading as well. Hence, it seems that crypto-markets still lack education and diligence.
What metrics would you suggest be made a standard for all cryptocurrencies to improve price discovery? Please share your views with us.