Introducing market sentiment indicator that helped avoiding losses in the current and past downturns

In this post we are introducing a new market sentiment indicator which we recently made available to users of our platform BittsAnalytics, Market Sentiment Indicator or MSI. In it is one of our indicators which we use to assess the sentiment of overall cryptocurrency market and is part of our framework of warning signals. It helped avoiding losses in the current and past downturns and we decided to make it available to our users.

Market Sentiment Indicator or MSI is based on sentiment of individual cryptocurrencies, with sentiment determined with machine learning from tweets mentioning the particular cryptocurrency. It is defined as the percentage of 10 largest cryptocurrencies whose sentiment was positive on a given day. It is a daily indicator, we will later also launch a real-time version of this indicator. Historical chart of MSI is presented below.

MSI of 100% (threshold values shown as red marks on chart) indicates excessive optimism or extreme relief optimism in the market making it susceptible to possible (further) downturns. We are interested in extremes when MSI reaches 100% and take that as potential warning signals. Bitcoin price is shown as a reference for the general market direction and returns. As of 2nd February 2018 there were four cases of MSI reaching 100%. In the first case the market made moderate gains over the next week. In other 3 cases the market made substantial losses over a week or longer after threshold. The losses (given in bitcoin returns as reference) were: -15%, -28% and -41%. Indicator also gave a warning signal within one day of Bitcoin reaching all time high close price. It also gave a signal before the latest downturn.

Market Sentiment Indicator Thresholds of 100% should not be used in isolation and would  ideally have more data points for better statistical significance, but we like it as another useful indicator for assessing the market sentiment. Over the next weeks we will add several more market indicators to our platform BittsAnalytics.

We believe that making profits in cryptocurrencies markets is becoming harder and the winners will be those with better data and better analytical tools. That is what we provide our users with our BittsAnalytics platform and if you want to start using MSI and many other data and tools you can find more information about becoming our user at www.bittsanalytics.com.

 

 

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