Warning from our market sentiment indicator was again correct – flashing warnings with Bitcoin at 6500 USD

In the beginning of 2018 we have introduced a market timing indicator based on social media sentiment of cryptocurrencies, where the sentiment is determined with machine learning from texts of social media posts.

For more detail and some of past warnings see e.g. our blog post from March of 2018:

Our warning Sentiment Market Indicator was now correct for the fourth time in a row

The market timing indicator was again correct recently, in flashing warnings before the latest fall in cryptocurrency prices. As you can see in the picture below:

it actually gave two warning signals in a short period of time. In a way the latest warnings were even more worrisome. The market indicator gives a warning when all among the top 10 cryptocurrencies in terms of market cap have a positive daily change in sentiment. In a sense it measures short-term excess optimism. But unlike most of previous cases this time was no major price jump before the warnings. In other words, despite a lot of excess optimism about bitcoin and sector in general (due to positive news on Bakkt and many others), there was almost no price change. If the price does not move on such optimism then it is likely that the upside is limited and downside can be large on potential negative impact news.

This is indeed what happened subsequently after the warning signals, a sharp drop in bitcoin and other crypto prices:

Our market sentiment indicator is part of our subscriptions, learn more about it at:

https://www.bittsanalytics.com/subscribe.php

Our Sentiment Market Indicator was flashing warning at 9800 USD – correct for the fifth time in a row

Market Sentiment Indicator is an indicator that we use to assess the sentiment of overall cryptocurrency market and is part of our framework of warning signals (* see detailed definition of indicator below). The latest warning signal from indicator came on 5th May with Bitcoin as a reference for the whole crypto market at around 9820 USD. The signal turned out to be again correct, crypto markets went in correction with Bitcoin reaching 7150 USD for a loss of almost 30%.  This is the fifth consecutive time our warning signal has been correct, i.e., it was followed by loss of at least ten percent. See the picture below and statistics for previous warnings (updated):

Date of Warning Signal Return of Bitcoin from signal to next trough
2017-11-18 4%
2017-12-08 -28%
2017-12-18 -41%
2018-01-24 -45%
2018-03-12 -20%
2018-05-05 -27% (updated)

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 our market sentiment indicator and many other data and tools you can find more information about becoming our user at www.bittsanalytics.com.

* 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. For comparison chart is plotted with Bitcoin open price as a reference for general market.

You can read about our some of our past warnings from market sentiment indicator in our previous blog posts:

Our warning Sentiment Market Indicator was now correct for the fourth time in a row

 

Our warning Sentiment Market Indicator was now correct for the fourth time in a row

Market Sentiment Indicator is an indicator which we use to assess the sentiment of overall cryptocurrency market and is part of our framework of warning signals (* see detailed definition of indicator below). The latest warning signal from indicator came on 12th March with Bitcoin as a reference for the whole crypto market at around 9300 USD. The signal was again correct, crypto market fell afterwards, Bitcoin at the moment is 7400 USD and thus down more than 20%. This is the fourth consecutive time our warning signal has been correct, i.e., it was followed by loss of at least ten percent. See the picture below and statistics for previous warnings:

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 our market sentiment indicator and many other data and tools you can find more information about becoming our user at www.bittsanalytics.com.

* 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. For comparison chart is plotted with Bitcoin open price as a reference for general market.

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.