As the crypto market continues to trade range-bound, the on-chain analytics firm Santiment has outlined key metrics that could help traders identify a market bottom. These indicators enable market participants to know when it is safe to inject more capital into their portfolio in anticipation of future rallies.
According to a Santiment report, the metrics include social trends, key stakeholder accumulation, a drop in Mean Dollar Invested Age, and social dominance fear, uncertainty, and doubt (FUD) signals.
When Market Bottom?
The crypto community is constantly talking about coins and predicting which direction their prices are heading. Santiment said these social trends are significantly influenced by the momentum that markets have shown over a timeframe, so this makes traders’ decisions emotion-based on most occasions.
A slight drop in an asset’s price—bitcoin (BTC), for instance—could trigger a sudden bearish narrative, with social media posts depicting negative sentiment. The opposite is often seen after a sudden spike in a cryptocurrency’s value. Hence, traders can predict future price movements by paying attention to the vocal majority on social media.
While paying attention to social trends, the dominance of positive or negative commentaries could signal a good time to buy or sell. Santiment noted that a high level of fear or missing out (FOMO) would lead to prices topping soon; however, major FUD could lead to great bottoming opportunities.
As a result, projects with high levels of negative sentiment present good buying opportunities, as prices often move in the opposite direction of the crowd’s expectations.
Old Coins Returning to Circulation
As the crypto community often gets predictions wrong, whales move prices the way they fit due to their large capital, which controls the market. Santiment says traders should watch key stakeholders no matter what asset they are analyzing.
The best times to buy are when crypto prices drop, and whale wallets accumulate aggressively. When whales start accumulating, there is often a surge in transactions valued above $100,000 or $1 million, so Santiment insists a spike in large transaction volumes is often a bullish sign.
Finally, a decline in the Mean Dollar Invested Age also signals a market bottom. This metric tells the average of the dollars invested in an asset. When this indicator drops, it means that a healthy level of dormant tokens is returning to regular circulation, which could trigger a market rally.
Notably, the Mean Dollar Invested Age works in tandem with another metric, Age Consumed, which indicates the number of tokens changing addresses on a certain date multiplied by the last time they moved. A huge spike in Age Consumed helps predict market bottoms.
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