Cryptocurrency analytics firm Santiment has published a comprehensive analysis assessing market psychology, investor behavior, and on-chain data following Bitcoin's sharp price movements in recent weeks.
The company stated that concepts such as “bull,” “bear,” “bottom,” and “top,” which are frequently used on social media, are now shaped by users' own narratives and have therefore largely lost their clarity.
Investor Sentiment and Social Media Trends
Santiment notes that Bitcoin's recent surge to $88,000, after threatening to dip below $80,000 last week, has revived the sentiment among some investors that the bottom has arrived. However, according to the company's data, comments on social media suggesting a bear market have increased significantly. The analysis suggests that this rising pessimism is a historically common sign during periods of major transformation.
Santiment's social media analysis shows that the percentage of positive comments about Bitcoin has dropped significantly compared to recent bullish periods. The company notes, "Markets often move against the crowd's expectations. Significant reversals often occur when individual investors lose hope."
On-Chain Data and Funding Rates
Santiment, which analyzes Bitcoin's exchange-based funding rates, notes that current short positions haven't reached the levels that triggered sharp surges in the past. Short positions, which intensified after October's all-time high, created a temporary rally. However, current data suggests there hasn't been a similarly aggressive short accumulation.
Santiment notes that Bitcoin's 30-day and 365-day MVRV ratios are still in negative territory, suggesting the average investor is losing money. This could support the possibility of a short-term recovery, according to the analysis. However, the overall trend remains under pressure.
Usage Data and Address Activity
Bitcoin's usage data is reported to be showing a significant decline. While 3.37 million new addresses were generated weekly in December 2023, this number has dropped to 2.21 million today. There has also been a sharp decline in active addresses, from 963,900 to 729,200.
According to Santiment, this weakness presents a picture that does not support a long-term uptrend.
Whale and Shark Wallet Behavior
The most critical part of the analysis concerns whale behavior. Whale and shark wallets holding between 10 and 10,000 BTC have been on a net sell-off for the past six weeks. Conversely, smaller wallets holding less than 0.1 BTC are accumulating rapidly.
Santiment thinks this is an unfavorable combination for bottom formation: "Almost every major rally post-COVID has been led by institutional investors. Unless the whales recover, it’s hard to say the market has formed a permanent bottom."
Outlook and Potential for a Rally
Sentiment data, funding rates, and MVRV indicators point to a near-term reaction rally. The analysis suggests that it wouldn't be surprising if Bitcoin rebounded above $90,000.
The company believes that the long-term trend remains downward due to the decline in Bitcoin's usage data and the selling behavior of whales.