The crypto market sentiment expresses the crowd psychology of everybody who is participating in the development and trading of a cryptocurrency, as reflected by social and trading metrics.
Sentimental analysis is a valuation or appraisal of the collective emotion and attitude of investors, traders, and fans in regard to a particular crypto asset or investment.
The aim of conducting sentimental analysis is to understand how the respective and collective perspectives of individuals impact the market value and price of individual cryptocurrencies; such perspectives don’t always reflect measurable patterns or metrics; instead, they convey the common feeling of a group or groups of individuals.
Conducting sentimental analysis in the cryptocurrency market can give interested individuals deep insight due to the social nature of the crypto industry.
Performing market sentiment analysis requires researching social channels, industry news, transaction alerts, and reading sentiment indicators to gauge current or forthcoming market movements.
It may likely be important to conduct a sentimental analysis after making an essential background check on the prospective cryptocurrency or cryptocurrencies of your choice. The following are some essential factors to consider, check, or assess before selecting your favorite crypto or cryptos:
1. Recent reportage or coverage
The news presented by reporters for newspapers, radio, or television outlets can make someone or something become incredibly popular. The same thing happens to cryptocurrencies.
The same way you may like to conduct a quick online check for something you are potentially interested in purchasing before agreeing to go ahead and purchase it is the same way you may like to consider analyzing what the media says before making a final selection of the crypto you’d eventually invest in.
Crypto companies know how much influence the media has on their cryptos and they pay a ton of money to popular search engines to place them right at the top of search results ranking systems.
To find out what media outlets are saying, you can simply click on the “News” tab of your search engine, and you’d be automatically directed to the “All” tab which includes relevant news, adverts, and general information that are potentially genuine because they aren’t paid ads.
2. Upcoming events
You can search for upcoming crypto events during the early—or even around the later—stages of finding the crypto of your interest: check websites such as www.newsbtc.com/crypto-calendar/ and https://coinmarketcal.com/ to discover cryptos that have announcements and events line up and may likely impact the cryptos in a positive way. It’s up to you to decide whether any crypto is right for your portfolio.
If you’re interested in investing in more than one crypto, then compile your final list of cryptos and check their respective websites to see whether they have blogs that share their upcoming events. Alternatively, you can check out third-party crypto calendars for additional information.
3. Negative press releases
People tend to be attracted to and enjoy reading negative stuff, and they become passionate about it. On the other hand, negative press releases or statements can serve as warning signs for you and all crypto enthusiasts as well. In the financial and crypto worlds, most negative press releases are hot topics and usually make the prices of their interest or assets to plummet.
Contrary to what people think, the exact period when the prices of assets plummet may be the best time to purchase them. Why? Because everyone would likely be dumping the assets at that time. So you can make an inquiry about and invest in such assets when they are down, and rise to the top with them during favorable times in the future.
Advice: if negative press releases are bad and highlight that a crypto is unlikely to recover from a drop-down, then it’s advisable to pass and forget about the crypto.
4. Crypto communities
Many cryptocurrencies depend on the participation or activities of their communities, and most crypto communities have their forums. Their shared or respective voices are worth giving your ears to.
A lot of cryptocurrencies use different websites as channels to communicate with their fans, users, investors, and traders. Examples of sites that have cryptos communities include:
- Bitcointalk (https://bitcointalk.org/)
- Reddit (reddit.com/)
- Telegram (https://telegram.org/)
- Steemit (https://steemit.com/)
The forums are important to assess because they give an idea about the type of people involved in the cryptocurrency and provide added or needed information about the cryptocurrency itself.
5. Exchanges that carry cryptos
Cryptocurrency exchanges constitute a large part of the whole crypto ecosystem, and good exchanges are often careful when selecting cryptocurrencies for their respective platforms.
You’d want to ensure that a cryptocurrency exchange has a crypto(s) of your choice. One good sign that the crypto you’re interested in is valuable, is when you notice that it’s available on many different exchanges; this implies that the demand for it is high and it could help your investment greatly.
6. Volume traded in a specified time period
Knowing the volume of crypto traded within a specified time period is important because it indicates how easy it would be to buy or sell the cryptocurrency. Higher volumes indicate that it would be easier to trade it off. Websites like www.cryptocompare.com and www.coinmarketcap.com show the number of crypto coins traded in the last 24 hours prior.
You can also find out the exchanges that trades were made on and their respective volumes of trades. Generally speaking, the biggest and most popular crypto coins are often traded the most. So when making a decision to choose a crypto, note that trading volume is an important factor you have to consider.
7. Coin market cap
One of the fastest ways to move ahead during your analysis of cryptocurrencies is to check their position or ranking based on their “market cap” or market capitalization.
A bigger market cap indicates a higher value of the units of a specific cryptocurrency that are up for sale at the moment. Knowledge of the market cap comes in handy when you’d like to choose only one crypto within a particular category of cryptos.
8. Circulating supply
The circulating supply is the number of crypto tokens or coins mined by people or companies; it indicates the number of coins currently available in the market and readily available to the general public.
The circulating supply is important because markets are generally influenced by the principle of “demand and supply”: when assets are in great supply and there aren’t enough people to purchase them, their prices are reduced so they can be sold quickly. The same applies to cryptocurrencies.
Usually, a smaller circulating supply may be more attractive to people who are interested in investing either in the short- or medium-term. Prices of a crypto may rise higher in the future when fewer of its coins are available and there is a higher demand.
On the other hand, a lower circulating supply may indicate something else which could be worrying to investors: lack of popularity! It’s also important to note that in some cases, the circulating supply may not even matter.
For example, in 2017 when the Ripple XRP crypto had a circulation supply of around 40 billion, and Dash had a circulating supply of only 8 million, the price of both (Ripple XRP and Dash cryptos) increased by about 3,900% and 8000%, respectively.