The bullish market sentiment, aided by the price recovery, has led many analysts to believe that Bitcoin is bottoming out in price.
It hit a four-month high above $21,000 in the third week of January. The market saw its most investor optimism since July due to the rise in BTC prices in January.
Trading crowd sentiment hit a six-month high and the second highest bullish sentiment in 14 months, according to data from crypto analytics firm Sentiment. The data suggests that traders are considering a rebound in Bitcoin’s price as a sign of a possible major breakout in the near future.
The term “crowd/investor sentiment” describes how investors generally feel about a particular asset or financial market. It refers to the mood of the market or the psychology of its participants, expressed through activity and changes in the price of the asset traded in that market.
Bitcoin Weighted Social Sentiment Source: Sentiment
The chart above shows three big jumps in investor sentiment since 2021. The first major spike in sentiment occurred in November 2021, after which the price of BTC reached an all-time high of 68,789. The second big jump came amid signs of a cut in inflation from the United States Federal Reserve in July 2022, followed by a smaller increase in interest rates. Traders bought dips at $19,000, although bullish sentiment following the sentiment of the July 2022 crowd was not significant due to bearish market sentiment.
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The last uptick in crowd sentiment came after the long winter of 2022. Market analysts believe that a BTC price rebound could signal a market collapse. According to independent market analyst HornHairs, bottom-to-peak and peak-to-bottom times have remained stable since 2015 at 152 weeks and 52 weeks, respectively.
When examining Bitcoin’s long-term price behavior, the period leading up to previous up and down cycles is surprisingly similar. What is more interesting is that the 2020 to 2021 cycle appears to follow a similar trend.