Bitcoin selloff does not match sentiment

Bitcoin opened today at $11,500 USD and as of this writing is sitting below $9,800. Rumors abound as to what is causing the decline from a whale investor trading over $400M of Bitcoin to a possible hack of 3rd party applications interacting with Binance’s API.

At Quantalysus we’re not looking to deeply into what is causing the price decline. Instead we’re viewing this price movement opportunistically. One hypothesis we operate under is that the cryptocurrency exchanges are heavily manipulated by bots and whales. Assume that large investors (whales) have other means to convert their cryptocurrency into fiat via OTC (over the counter) options. If this were the preferred exit method institutional investors would heavily impact the average price they can fetch for their portfolio. With this in mind we view sharp price declines in Bitcoin to manipulation and subsequent psychological retail investor selloff.

We also leverage a visualization tool published by Christopher Healey, a faculty member at North Carolina State University, to measure sentiment on Twitter. Cryptocurrency information seems to bubble first via Reddit, Telegram, and Twitter. Using Twitter’s API the visualization below attempts to measure sentiment on a trending topic. The measurement looks at whether sentiment is low or high.

How to read the chart:

  • Each tweet is shown as a circle positioned by sentiment, an estimate of the emotion contained in the tweet’s text. Unpleasant tweets are drawn as blue circles on the left, and pleasant tweets as green circles on the right. Sedate tweets are drawn as darker circles on the bottom, and active tweets as brighter circles on the top. Hover your mouse over a tweet or click on it to see its text.

Bitcoin sentiment


Screen Shot 2018-03-07 at 10.59.49 AM

Ethereum sentiment

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What we take away from the charts above

Bitcoin has more unpleasant and subdued tweets in comparison to Ethereum. One could suggest this sentiment feeds the follow on psychological sell off. Please note how much more tweets are sitting in green in the pleasant (right half) side of the cartesian plane. This chart alone is not enough to inform our decision but it does validate why we are opportunistic.

Keep calm and HODL on.

Caveat: always do your own research (DYOR) and manage your own risk accordingly.

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