The data shows that XRP and Cardano investor sentiment has plummeted lately, but based on history, it might be a good time to get greedy.
XRP, Cardano, Bitcoin and Ethereum Show Negative Sentiment
According to network analytics company Saint, price bounces become more likely during periods of such distrust. The relevant indicator here is the “weighted sentiment” Santiment, which, as its name already suggests, measures investor sentiment towards cryptocurrencies.
The metric has two main components; firstly, it is a “sentiment score”, which checks whether investors are talking positively or negatively about a given coin on social networks.
This indicator works by looking at social media text documents (such as tweets, Reddit threads, forum posts, etc.) and applying a machine learning algorithm to gauge overall sentiment.
The other component is “social volume,” which measures the total number of social text documents currently discussing the cryptocurrency in question. For example, all social media posts that mention ADA or its synonym will help to increase the social activity of Cardano.
The mood score is weighted by this social volume to arrive at a “weighted mood” (hence the name). Here is a chart showing the sentiment weighted trend for four coins: Cardano, XRP, Bitcoin and Ethereum.
Looks like the value of the metric has been negative for all these coins | Source: Santiment on Twitter
When weighted sentiment is highly positive for an asset, users talk a lot about the coin and the mentions are generally positive. On the other hand, negative values suggest that the social media conversation is negative. The metric stays near zero when sentiment is neutral or there is insufficient social volume.
As shown in the chart above, Bitcoin, Ethereum, XRP, and Cardano have all experienced sharp drops over the past couple of weeks as their prices struggled. Now investors are scared.
Sentiment, however, notes that, according to the firm’s metrics, the likelihood of a price spike increases when investors are distrustful, as they are now.
There is a whole trading strategy based on this concept, which is called opposite investing. According to traders who follow this idea, the best time to buy is when investors are in the worst psychological state. Similarly, the most optimal buying windows are when the market is at its most hyped.
Traders using this strategy are trading against the general market, hence the “opposite” in the title. Warren Buffett’s famous quote also sums up the philosophy perfectly: “Be afraid when others are greedy and be greedy when others are afraid.”
Since the attitude towards cryptocurrencies such as Cardano and XRP has now become extremely negative, this may be a sign that the markets have hit a local bottom.
ADA Price
At the time of writing, Cardano is trading around $0.32, down 10% over the past week.
ADA has observed some decline recently | Source: ADAUSD on TradingView
Credit : www.newsbtc.com
