bitcoin has seen a bounce above the $43,000 level over the past day. Here is a possible reason behind this asset reversal.
bitcoin has recovered towards the $43,000 mark
Just before, bitcoin had fallen to a low of $40,500 as the market had witnessed significant selling pressure. However, in the last day, btc already turned around as it recovered above the $43,000 level.
The following chart shows the roller coaster that the cryptocurrency has gone through in recent days:
<img decoding="async" class="alignnone size-medium aligncenter" src="https://www.tradingview.com/x/gr5kQBtZ/" alt="bitcoin price chart” width=”1534″ height=”870″/>
Looks like the price of the asset has sharply surged during the past 24 hours | Source: BTCUSD on TradingView
As is often the case, the other assets in the sector have also followed the lead of the original cryptocurrency and turned a corner, experiencing their own rises.
Due to this sharp rise across the market, the futures side has seen a large number of liquidations, as the following table shows:
<img loading="lazy" decoding="async" class="alignnone size-medium wp-image-270266 aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/12/Bitcoin-Rebounds-Above-43000-Here39s-Why.png" alt="bitcoin Settlements” width=”553″ height=”302″ data-recalc-dims=”1″/>
The total amount of futures liquidations in the last 24 hours | Source: CoinGlass
Naturally, shorts have taken the brunt of the hit in this cryptocurrency sell-off event, with $95 million of the $126 million total coming from such contract holders. bitcoin shorts alone have contributed around $41 million to these liquidations.
Now, what is the cause of this sudden reactivation of the market? Data shared by on-chain analytics company Santiment may provide some clues in this regard.
Cryptocurrency Traders Showed Deeply Negative Sentiment Ahead of the Bounce
As Santiment explains in a new mail In X, cryptocurrency traders have shown fear on social media over the past few days. The indicator of interest here is “weighted sentiment,” which in turn is based on two other metrics called sentiment score and social volume.
The Sentiment Score measures the sentiment shared by the majority of traders on major social media platforms. To separate positive and negative sentiments, the metric uses a machine learning model trained by the analytics company.
The other relevant metric here, “Social Volume,” tracks the total amount of discussion a particular topic receives on major social media platforms.
Now, what weighted sentiment does is take the sentiment score and compare it to the social volume. This means that the metric's value only records a spike when sentiment tilts to one side and discussions increase on these platforms.
Here is a chart showing the trend in weighted bitcoin sentiment over the past few months:
<img loading="lazy" decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2023/12/Bitcoin-Rebounds-Above-43000-Here39s-Why.jpeg" alt="bitcoin Sentiment” width=”2595″ height=”1751″/>
The value of the metric appears to have been quite negative in recent days | Source: Santiment on X
Historically, the price of bitcoin has tended to move against crowd expectations. From the chart, it is evident that the highs have coincided with the sentiment weighted registering highly positive values (i.e. when FOMO increases among traders).
Similarly, the indicator that sees very negative spikes is when bottoms have formed. As can be seen from the chart, FUD had taken over investors' minds after the asset's recent drop, as the sentiment weighted had plummeted.
It seems that, once again, the price of the cryptocurrency has been helped by fear among investors, as it has rallied against majority sentiment.
Featured image by André François McKenzie on Unsplash.com, TradingView.com charts, Santiment.net
