Bitcoin's On-Chain Metrics Give Traders Mixed Signals

Bitcoin was trading at $51,548.29 at press time, down 1.28 % over the past twenty-four hours.

What Happened: The cryptocurrency’s BTC/USDT Perpetual funding rate climbed higher to 0.1543%, indicating that the market was overheated, with more buyers present.

Normally, given these indications, traders might have prepared for another leg up to a potentially higher price point.

Why It Matters: However, data from crypto on-chain analytics tracker Santiment revealed that Bitcoin’s social volume was trending lower.

Santiment’s weighted sentiment tracking metric indicated positive commentary surrounding Bitcoin on Twitter Inc TWTR was lower today.

While it may seem as though the crowd consensus is celebratory after #Bitcoin's new ~$52.6k #AllTimeHigh was established Wednesday, our weighted sentiment tracking indicates that #Twitter's social volume and positive commentary is down today. But if you have been #hodling pic.twitter.com/VrHHDAAEfv

— Santiment (@santimentfeed) February 18, 2021

“This crowd doubt should actually instill confidence,” stated Santiment. Based on the platform's studies, negative scores are historically times to buy, while positive scores are more suitable for profit-taking.

What Else: Canadian economist Hersh Shefrin shared some insight on why he believes there are so many contrasting opinions about the leading cryptocurrency.

According to Shefrin, Bitcoin has behaved like a ‘high sentiment beta stock’ throughout its ten-year history.

High sentiment beta stocks are typically very speculative and associated with opportunities for either making or losing a lot of money, notes the economist.

“Successfully investing in high sentiment beta stocks involves buying them during periods of low sentiment because that is when they tend to be undervalued,” said Shefrin.

For investors that struggle to value non-cash generating assets like Bitcoin, metrics corresponding to market sentiment can go a long way in assessing a token's fundamental value.

Image: CINDX via Medium