Following crowd a losing strategy?
Friday, the reinstatement of Bitcoin at $ 84,500 illustrates why following the feeling of the crowd often leads to bad commercial decisions.
Recent market movements contradict common predictions during periods of fear or extreme greed.
Analysis of health data reveals that social media has reached maximum negativity when bitcoin (BTC) dropped $ 78,000 earlier in the week. There were also chatter online on other drops. This model reflects market behavior at the end of February when an increase in temporary prices in early March followed the retail prospects for merchants.
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“The Bitcoin rally goes to $ 84.5,000 on Friday shows what is happening when the crowd on Monday claims it is time to sell,” noted Santiment. “You could expect it, Fud reached its peak, because $ BTC was down $ 78,000, the weakening predictions lower prices on social networks.”
Research highlights the recent stability of Bitcoin in a defined range, having neither dropped below $ 70,000 nor exceeded $ 100,000 in last month. This stability creates clear feeling markers: predictions less than $ 70,000 signify excessive fear, while forecasts above $ 100,000 in signal overexuberance.
“Historically, the markets move the opposite management of the expectations of the crowd,” said Santiment. They noted that clusters of lowering predictions ($ 10,000 at $ 69,000) often follow upward reversals, while bullish forecast groups ($ 100,000 to $ 159,000) generally report slowdowns.
Technical analysis supports this approach based on feeling. Crypto Rekt Capital analyst stressed that “signs of weakening resistance were there”.
He noted that the recent price movement is filled the CME gap between $ 82,245 and around $ 87,000. He suggests that a daily closure above the resistance could further catalyze the momentum up.
The structure of the current market also presents potentially bullish technical signals. Another analyst, Merlijn The Trader, said “Golden Cross” by Bitcoin.
This is a technical model where the 50 -day mobile average crosses the 200 -day mobile average.
This indicator has historically preceded substantial rallies:
- 139% in 2016
- 2,200% in 2017
- 1,190% in 2020 after previous events.
When the feeling reaches extremes, the positions become overcrowded on one side, creating the conditions of net reversal. While merchants collectively leers, selling pressure exhausts, mainly leaving buyers influencing prices.
At the last check, Bitcoin dropped by 0.2% for the day, trading at $ 84,145. It is down 22.7% compared to its historic summit of $ 108,786.
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