Data shows Bitcoin sentiment on social media may be starting to become overheated, a sign that could end up being a threat to the price rally.
The metric works by filtering posts/messages/threads containing mentions of the asset and putting them through a machine-learning model that separates between positive and negative comments. The indicator counts up the number of both types of posts and takes their ratio to provide a net representation of social media.
Now, here is the chart shared by Santiment that shows the trend in the Positive/Negative Sentiment for Bitcoin over the past month:
As displayed in the above graph, the Bitcoin Positive/Negative Sentiment has seen a spike in the zone above the 1.0 mark, which suggests a flood of positive posts related to the asset have hit social media platforms. This turn toward a significant positive sentiment has come as the cryptocurrency’s price has been going through a recovery surge.
While some hype is to be expected, an excess of it can be something to watch out for. The reason behind this is the fact that Bitcoin and other cryptocurrencies have historically tended to move in the direction that goes contrary to the crowd’s opinion.
This means that a surge of greed in the market is something that can lead to a top for the asset’s price. Similarly, a cooldown in sentiment can imply a bullish reversal instead.
From the chart, it’s apparent that the Positive/Negative Sentiment declined to a relatively low level a few days ago when Bitcoin saw a drawdown toward $100,000. This fear among social media users may have helped the coin reach a bottom.
Bitcoin briefly broke above $110,000 during the past day, but the asset has since seen a minor pullback as it’s now back at $109,500.
