Data shows Bitcoin’s retrace below the $117,000 level came right after a major spike in social media chatter, often a contrarian signal.
Bitcoin Social Dominance Saw A Huge Spike As BTC Crossed $123,000
In a new post on X, the analytics firm Santiment has shared how social media users reacted to the latest Bitcoin price breakout. The indicator of interest here is the “Social Dominance,” which tells us about the share of social media discussions related to the top 100 cryptocurrencies that any given coin occupies.
The metric is based on another indicator known as Social Volume, which gauges the unique number of posts/threads/messages on major social media platforms that mention an asset. The reason the Social Volume doesn’t simply count up the mentions themselves is so that a few social media circles with a large amount of discussion don’t skew the data by themselves. The metric’s value only spikes when talk around the asset is more spread out.
The Social Dominance determines what percentage of the Social Volume associated with the 100 largest coins by market cap that a particular cryptocurrency accounts for.
Now, here is a chart that shows the trend in the metric for Bitcoin over the last couple of years:
As displayed in the above graph, the Bitcoin Social Dominance shot up to a high of 43% when its price rallied to the new all-time high above $123,000. This means that the asset was receiving mentions in almost half of the social media discussions related to the digital asset space.
The latest spike surpasses any other from the last two years, showcasing the rare dominance of mindshare that BTC achieved during the rally. Since the social media talk has intensified, however, the BTC price has plummeted.
This isn’t anything too unexpected, as Bitcoin and other digital assets have historically tended to move in the direction that goes contrary to the expectations of the retail crowd. Whenever social media users get too hyped up, prices can correct downwards. Similarly, an excess of fear can facilitate bottoms.
“Though it’s generally a fantastic sign that the #1 market cap has had its deserved spotlight, the sudden spike was indicative of many retail traders FOMO’ing in,” notes Santiment. “Wait for the euphoria to cool down some, and you’ll likely find another key entry point coming up.”
It now remains to be seen how social media sentiment would develop now that the price has declined and whether it would play a role in shaping Bitcoin’s next move.
BTC Price
Bitcoin has witnessed a drop of more than 3.5% in the last 24 hours, which has brought its price back to the $116,900 mark.
Featured image from Dall-E, Santiment.net, chart from TradingView.com
