Investors, traders and market watchers need two months to adjust to new long-term trends in the cryptocurrency markets, a study conducted by the fintech company Cindicator has revealed. For example, one of the key findings is that in January and February of this year the collective mood was still bullish and most participants were forecasting growth, despite a clear downward trend. Sentiments changed in March after the total capitalization had already fallen below $300 billion during the previous month.
The “Collective Crypto Mood Swings” report is based on data from over 111,000 users of Cindicator’s mobile and web applications that allow them to make daily forecasts about a range of digital and traditional assets. They are asked almost 200 questions every month about the likelihood of certain events and are granted points for correct predictions but lose points in case of incorrect answers. At the end of each month, the “analysts” are rewarded in ETH if they have earned at least 1 point. The survey covers the nine-month period between September 2017 and May 2018.
The company also claims that 5,000 traders and investors are using indicators created by combining collective forecasts based on the opinions of these subscribers who come from more than 135 countries and are active followers of crypto markets from different age groups and backgrounds. Their inputs are enhanced by AI using machine learning algorithms and a neural network to produce predictions with high accuracy.
According to the authors, the expectations regarding crypto markets change similarly to those about other asset classes. It took investors 60 to 100 days on average to adapt to a new long-term trend in the markets of the different assets they were asked about. The researchers also found that the higher volatility leads to greater mood swings. They’ve provided an example with ethereum, noting the strongly polarized public view of the cryptocurrency in March when the price of ETH in US dollars dropped by more than 50%.
Bullish on BTC and ETH Months After the Peak
Cindicator reports that in the studied period the median opinions remained positive for both bitcoin core (BTC) and ethereum (ETH). More fluctuations were registered in the case of ethereum, while the median mood for bitcoin core remained consistent, despite the significant market ups and downs between September and May.
The analysis of the forecasts shows that the public was highly optimistic about the future of bitcoin (BTC) for two months after the leading cryptocurrency reached its peak of almost $20,000 in December, 2017. Then the distribution of opinions became more balanced in March, long after the four-month decline had started.
The situation with ethereum looks pretty similar. The polled subscribers were highly optimistic in February after the USD price of ETH peaked at $1,400 in January. In both cases, opinions were most positive during the months with the highest volatility: December, January and February. According to the report, this is likely due to expectations of mean reversion after the big drops.
Changes in opinions and prices.
The data for May, the last month covered in the study, shows that optimism for ethereum had returned to the levels recorded in February, while the mood about bitcoin core remained subtle as the price of BTC dropped to the low $7,000s. Ether markets were again volatile while the volatility of the bitcoin core markets dropped to its lowest level since September. Cindicator analysts have interpreted that as an indication of the new perceived norm – the range between $7,000 and $8,000.