Bitcoin has seen “buy the dip” mentions spike on social media after the price crash, but Santiment warns this could be a contrarian signal.
Santiment has filtered the Social Volume for Bitcoin-related keywords and terms pertaining to calls for “buy the dip.” Below is a chart showing the trend in the metric over the past month.
As is visible in the graph, the Bitcoin Social Volume has spiked for these terms, indicating that interest in buying the dip has surged among social media users. At the current value, dip-buying calls are at their highest in 25 days.
While this could sound like a signal that a rebound may be coming soon for the cryptocurrency, history has had many examples of the contrary. “Prices typically move the opposite direction of the crowd’s expectations,” explains the analytics firm. Considering this, the dip-buying hype could actually be a sign that more pain may be ahead for BTC before the bottom can actually be in.
The indicator turned sharp red just ahead of the latest plummet in the Bitcoin price, indicating that short positions became dominant on Binance. After the decline, however, traders changed their tune as the metric switched back to being green.
This trend would suggest that investors are hoping Bitcoin would rebound soon. “Ideally, for a notable price bounce to occur, we need to see a sustained period of shorts outpacing longs,” notes the analytics firm. As such, this could be another indicator to keep an eye on, as a flip into the negative for an extended phase may pave the way toward a bottom.
Bitcoin has been unable to make recovery from its crash so far as its price continues to trade around $112,700.
