Crypto sentiment platform Santiment has issued a warning to traders regarding the common assumption that the market has reached its lowest point. The firm notes that an uptick in sentiment expressing confidence in a “bottom” often precedes further declines, cautioning the community as Bitcoin sentiment has shifted toward fearfulness.
Recent analysis revealed that Bitcoin’s social dominance has risen above 40%, coinciding with a significant drop in positive sentiment, which has hit a one-month low. The sentiment firm highlighted that $1.17 billion has flowed out of Exchange-Traded Funds (ETFs) recently, a trend that historically indicates market bottoms.
In a report, Santiment advised traders to exercise caution when widespread consensus emerges around a specific price floor, explaining that genuine recoveries often occur when the majority anticipate further declines. This insight accompanies Bitcoin’s recent slip below $95,000 amid a tech-led sell-off.
Notably, social media chatter has surged regarding claims that the worst phase might be over—a sentiment Santiment argues often signals further declines. The firm pointed out that discussions around price thresholds, like Bitcoin falling below $100,000, frequently precede bottom-calling surges.
As Bitcoin’s price faltered, social conversations about the cryptocurrency experienced a spike, particularly with mentions of prominent figures such as Michael Saylor. During an appearance on CNBC, Saylor dismissed rumors regarding his firm selling any Bitcoin.
Additionally, Santiment interpreted recent ETF outflows of $1.17 billion as possibly bullish in the long term. Historically, significant outflows have aligned with market bottoms, indicating retail panic among investors. On Thursday alone, the market witnessed $866 million in net outflows, marking it as one of the most considerable exits on record.
The prevailing negative sentiment has led the Crypto Fear & Greed Index to plummet to an “Extreme Fear” score of 10, reflecting the lowest levels of investor confidence since late February.
Despite these challenges, analysts are divided in their assessments. Bitcoin has struggled to surpass the $96,000 level following the recent drop, mirroring conditions earlier in the year during a decline from $102,000 to $84,000. However, some experts, including Bitwise’s European head of research, have noted that the current scenario appears less severe compared to previous corrections. The firm’s sentiment index shows a “positive divergence,” suggesting that while bearish sentiment persists, it is not as extreme as in earlier downturns.
Broader economic uncertainties continue to influence the cryptocurrency landscape. The recent conclusion of the longest government shutdown in U.S. history, marked by a bill signed into law by President Donald Trump, has added to the market’s volatility. Increased attention has now shifted towards the Federal Reserve and its upcoming rate decisions.
Despite persistent pessimism, analysts highlight constructive patterns emerging on the charts. For instance, Sven Henrich, founder of NorthmanTrader, pointed to a “falling wedge” pattern and positive divergence as potentially favorable for Bitcoin investors. Furthermore, Messari’s research manager expressed a notable dissonance between prevailing sentiment and the underlying fundamentals, emphasizing that amidst favorable developments in the industry, the overall sentiment feels paradoxically bleak.
