The Power Of The Social Media

crypto.inferno (67)in #blockchain • 6 years ago

Sentiment is a huge driver in the crypto markets, where it’s often difficult to gauge fundamentals. But it can be hard to measure. This analyst offers some useful tools.

If you were able to gather every social media post that mentions cryptocurrency and analyse its content properly, you’d have a pretty good source of information about where the market was heading. Tracking evolving sentiment would give you a clear edge on price action, enabling you to see the future before it happened.

Unfortunately, the kind of sophisticated AI and processing power you’d need to do that doesn’t yet exist. But it’s still possible to use social media sentiment as a useful guideline for trading – if you know how to handle the information you gather.

In this article, Ben Hunter-Craig explains the approach he takes. It’s a complicated business, he writes, because analysing content for its underlying meaning is anything but easy – especially when a ‘good’ event for one person can be a ‘bad’ one for another.

Merely tracking the number of posts is a good start; the volume of material tends to increase in a bull market. As we’ve noted, Google Trends is a useful indicator, since search traffic prefigures price rises. In this analysis, news spikes do appear to foreshadow price spikes.

The full analysis is complex, and there’s more to come, but this is a useful starting point for anyone who wants to get an edge on their trading. Fundamentals offer a good baseline for the hodler; technicals provide ongoing information about evolving price action and where the market may head – and how far – at any given point. For a third and vital source of information that most traders simply won’t bother to access, then Sentiment analysis gives you an unusual weapon in your armoury.

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