Investor Sentiment on the Cryptocurrency market

[ycollin]

Hello everyone,

I am currently working on my Master Thesis and as you can guess, the subject of it is ‘Investor Sentiment on the Cryptocurrency market’.

I came on this forum to get answers from the people who have already invested in cryptocurrencies or are actually experimented on this subject. My question to all of you is the following: From your point of view, what could be the factors responsible of sentiment on the cryptocurrency market ?

Just to clarify the terms used in my question, Baker and Wurgler (2006) gives two definition of investor sentiment:
1) The propensity to take risks and to speculate.
2) The overall sense of optimism or pessimism about stocks

Also if you have any papers that could contribute to my Literature Review, I am willing to take your suggestions.

Best,

ycollin

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[Wall_Streeet]

the chain of events and price decline, i.e. each price should be considered as a starting point for further sale of this asset by another market participant. it is also necessary to consider the correspondence of the current price to its real need

[Juggy777]

Hello everyone,

I am currently working on my Master Thesis and as you can guess, the subject of it is ‘Investor Sentiment on the Cryptocurrency market’.

I came on this forum to get answers from the people who have already invested in cryptocurrencies or are actually experimented on this subject. My question to all of you is the following: From your point of view, what could be the factors responsible of sentiment on the cryptocurrency market ?

Just to clarify the terms used in my question, Baker and Wurgler (2006) gives two definition of investor sentiment:
1) The propensity to take risks and to speculate.
2) The overall sense of optimism or pessimism about stocks

Also if you have any papers that could contribute to my Literature Review, I am willing to take your suggestions.

Best,

ycollin

Hey Ycollin you have taken an interesting topic and I hope you write a good thesis, now coming back to your question there're multiple factors which lead to sentiments being high some are expected price hike, or a positive news which shall fuel price hikes, a prominent person throwing his weight behind cryptos, or a big organisation adopting it. It's pertinent to note that if any big country's government issues a positive signal for bitcoins its sentiment rises, as of now sentiments are bullish due to imminent pending approval of bitcoins etf.

[mu_enrico]

FYI, I've posted a topic about cryptocurrencies' return a few months ago, but failed to get a response because of shitposters fiesta.

Anyway...

The journal by Wang & Vergne was published in 2017, I don't know if it's still suitable for the present date. However, this is not about the market as a whole but about some sample coins.
http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0169556

Here are the findings:

1. Technological development is positively and significantly associated with weekly returns.

This is related to GitHub activities (more is better).

2. The public interest is negatively and significantly associated with weekly returns.

The funny thing is that if a coin got more buzz, the relationship would be negative.

3. Liquidity is positively and significantly associated with returns.

More liquidity means more return. Maybe this is why coins want to be listed in the top exchanges.

If your research about the market as a whole, I think it still related to the macroeconomics, since cryptocurrencies price movement seems to conform with stocks price movement.

Just tentative ideas for proxies:
- Investor forecast on USD interest and the inflation rate;
- Investor forecast on US GDP growth.

But, I don't know if you should use global data or only US data. Maybe only US data is enough since the last major drop (10/11/2018) in US stock market seems to match with the crypto market.

- Number of ICOs;
- Trading volume.

But you might want to sort shitcoins out of your sample since I believe it will ruin your statistical analysis

[Hydrogen]

I came on this forum to get answers from the people who have already invested in cryptocurrencies or are actually experimented on this subject. My question to all of you is the following: From your point of view, what could be the factors responsible of sentiment on the cryptocurrency market ?

Earlier this year, there was a poll conducted in an attempt to quantify the percentage of population with current ownership of bitcoin or another crypto currency.

Poll numbers appeared to correlate a higher percentage of bitcoin (or crypto currency ownership) with higher inflation rates and greater risk of economic crisis. Nations like turkey and venezuela which are known to have high rates of fiat currency inflation reported some of the highest rates of crypto ownership in terms of population.

In terms of social issues, the consensus says it takes a long time for people to adjust and adopt change. When it was discovered that fruits could stave off scurvy for sailors on ships, it still took more than 10 years for people to accept that this worked. Its natural to expect a lengthy transition period between current markets and broader acceptance of crypto. With the main determining factor possibly being inflation rates and concern over economic crisis.

Below is a reference for your literary review.   

https://bitcoinschannel.com/how-currency-crises-are-driving-nations-to-crypto/

[Ctn]

I would say my sentiment are all about the money that I am putting into it. This money is attached to me that way because I have hard earned it earlier and thus I know the importance of it. Whenever I go and invest my money into crypto world which is far more sensitive than anything then it creates a feeling inside my mind which drives me crazy. This is a sentiment where I get many questions in my mind, like what if I loose my investment, what if things go wrong with the project in which I have invested. I have always try to overcome this sentiment so that I can relax and make investment freely. But as you know most of the time our mind takes over things.

[omonuyak]

I would say my sentiment are all about the money that I am putting into it. This money is attached to me that way because I have hard earned it earlier and thus I know the importance of it. Whenever I go and invest my money into crypto world which is far more sensitive than anything then it creates a feeling inside my mind which drives me crazy. This is a sentiment where I get many questions in my mind, like what if I loose my investment, what if things go wrong with the project in which I have invested. I have always try to overcome this sentiment so that I can relax and make investment freely. But as you know most of the time our mind takes over things.

That is what all of us will said but the reality is that investors sentiment do affects all of us as investor.  The market is bearish now because of the forces of demands and supplies and the market factors that affect price of any assets is sentiment.  When people are not putting money and you are the only one trading you will make loses.
This time last year I know how people were happy investing into cryptocurrencies market and that investments was translated into high price. But most people now are getting discouraged because of the way big investors has move the fund from the market.

[LeGaulois]

The volatility...
Giving excitations to people agree to take the risk to speculate, and creating a positive or negative feeling on the market.
You can have a group of people living only to see Bitcoin with a high volatility, it's what entertains them and often how they make them money. You can have another group of people who the volatility will give them a positive feeling (to them to make some money) or a negative (since they think they won't make a profit)

[usekevin]

Hello everyone,

I am currently working on my Master Thesis and as you can guess, the subject of it is ‘Investor Sentiment on the Cryptocurrency market’.

I came on this forum to get answers from the people who have already invested in cryptocurrencies or are actually experimented on this subject. My question to all of you is the following: From your point of view, what could be the factors responsible of sentiment on the cryptocurrency market ?

Just to clarify the terms used in my question, Baker and Wurgler (2006) gives two definition of investor sentiment:
1) The propensity to take risks and to speculate.
2) The overall sense of optimism or pessimism about stocks

Also if you have any papers that could contribute to my Literature Review, I am willing to take your suggestions.

Best,

ycollin

The speculation in the price of bitcoin ,still ruin the bitcoin.Their will be some optimistic and pessimistic thought in money dealing matter.It also will be their in stock market.Most of the holding traders will be the positive thinker.The short term panic seller will be the negative thinker in trading.Use to buy bitcoin at low price and sell at high price.It's easy way to get profit.

[exstasie]

Sentiment tends to lag behind price.

When a market is bottoming out and beginning to enter a bull market, investors are usually still stuck in a bear market mentality. Most will assume that bounces = selling opportunities and that the market won't recover. This sentiment implies that investors have mostly been shaken out, and the market is heavily short. This supply/demand dynamic creates lots of "price chasing" as the bull market confirms. All the sellers and shorters need to repair their positions. This creates a feedback loop where higher prices beget higher prices.

The opposite happens at market tops. Everyone is bullish at the top, buoyant and expecting continued gains. When the market starts crashing, general sentiment is "hopeful" or in denial about the possibility the rally is over. This causes investors to hold through declining prices. Like the bottom sellers mentioned above, these underwater bulls continually pressure price downwards as they capitulate and exit the market.

[Reid]

Hello ycollin,

I have been in crypto for a while by now. So I am in the flash back when you asked this questions.

First of all it was about the money. Yes it is. I am the same as every newbie here which thought of a higher compensation in just a little amount of time but as I get more knowledge about every crypto currency specially bitcoin, I learned it should not be the way it is.

USD is a currency and Bitcoin is also one. So what are we trying to get if both are currencies? Mostly we want a paper in our hands just so to say I have money. A physical thing.
Bitcoin changed the way I think. I don't need that physical thing just to say I am rich. Because I know I am and will be more once every nation adopts the crypto world.

Now about the market. As I said, it needs adoption. This dumps and pumps will just happen over and over since people are still thinking to have that "$". But in time, they will also ask themselves, Why?! BTC is also a currency. No need to exchange it.

[Cajor]

I think the overall sense of optimism and pessimism drives a investor's sentiment. Any positive prediction or good news will have a huge impact on a person optimistic about crypto's future. And quiet the opposite for a pessimist person.

[Angelique Donovan]

This is indeed an interesting topic as there are multiple which lead to high sentiment such as and not being limited to, price hikes, postive news from the media regarding it which fuel the price hikes etc. It's important to note that if any big country gives the green signal for bitcoins its sentiment will rise. as of now, sentiments are bullish due to imminent pending approval of bitcoins. But we'll know for sure in the future if anything changes on the matter.

[BrewMaster]

in my experience it is hard to say because this market is still pretty small and very manipulated. and that makes everything near impossible to analyze including the investor sentiment.
for example time and time again we have seen altcoins that had no reason to rise, go up a lot because someone was pumping them and that pump changed the sentiment to buy because many investors are well aware of the situation and want to join in and make the quick profit.

[Ridwan Fauzi]

I think there is no difference between the cryptocurrency market sentiment and other investment places such as stock exchanges or stocks. Each investor or trader will have a different view when predicting the direction of prices, they will predict the direction of the price after seeing the price conditions at that time.

As the price conditions if continue to decrease, they will assume the bearish market will come, and otherwise, when prices continue to increase, each investor/trader will assume that the market will experience a bull run.

However, in dealing with bearish and bull markets every investor/trader will take different actions, for those who are always dissatisfied with the decisions they made when the market is bearish then what they did is wait and hope the market will increase and also when the bull market came they will wait and hope prices will continue to rise so as they forget the targets they had before.

[St4yInTh3D4rk]

I think there is no difference between the cryptocurrency market sentiment and other investment places such as stock exchanges or stocks. Each investor or trader will have a different view when predicting the direction of prices, they will predict the direction of the price after seeing the price conditions at that time.

There is a difference when it comes to crypto currency investment because they just invest on the speculation basis and technical analysis which maybe completely wrong at any time because of volatile market whereas the stocks can be analysed by comparing the world economic range and sometimes the prices of fuel changes will leads to change in the stock value right?!

[Aidenpeters]

The whole bitcoin system started based on the sentiment. Also as the volatile nature of crypto kept the people interested, but the current stability is making the old investors bored

[binhvo1505]

In my opinion, that is the optimistic sense of the stock. I think that many traders should put their trust in their portfolios in this market. I think this is a market of belief, we need to give it confidence and be loyal to it. A good result will happen in the future if every investor understands this.

[exstasie]

in my experience it is hard to say because this market is still pretty small and very manipulated. and that makes everything near impossible to analyze including the investor sentiment.
for example time and time again we have seen altcoins that had no reason to rise, go up a lot because someone was pumping them and that pump changed the sentiment to buy because many investors are well aware of the situation and want to join in and make the quick profit.

I don't think Bitcoin is particularly manipulated. I've found that reading sentiment and commitments of traders is really useful for BTC, just like it is in the "real" markets like forex. To a large extent, this extends to ETH and the more liquid altcoins.

Much of the altcoin market is very "pumpable" though, because liquidity is so low. I'd say the less liquidity a market has, the less useful sentiment reading is. With low volume / low market cap coins, a single whale can completely change the available supply and demand. That's not possible with larger coins.

[DOH!]

The whole bitcoin system started based on the sentiment. Also as the volatile nature of crypto kept the people interested, but the current stability is making the old investors bored

This market is still very new and trading volume is not large so I believe that its future development potential is very good. Put your trust in cryptocurrency because I think it will be a huge financial market in the future.