Crowd money sentiment remains bullish, expecting a recovery after the July dip

Santiment’s metrics reveal that crowd money is more bullish than during previous price dips. In the past few days, Bitcoin (BTC) and Ethereum (ETH) sank to a lower range, but managed to recover and bounce. 

Crowd money metrics, as opposed to smart money, measures the behavior of a bigger pool of retail traders. In the past days, some of the most watched whale wallets turned to selling, but retail traders were already used to the volatile nature of crypto. The latest data show crowd money is bullish, instead of spreading fear of a bigger dip. 

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Metrics of crowd money show the mass of investors expects a relatively fast recovery after the recent shakedown. The sentiment, however, can be misleading as to the real direction of the market, where the shakedown can continue.

Based on “buy the dip” messages, small-scale traders are taking a chance on an easy recovery and almost immediate gains. At the same time, some social media carry a bearish message, especially for BTC, expecting further slides as low as $40,000. The current price level for BTC and ETH is viewed with skepticism, both as a chance to increase spot positions, but also as a risk for further dips. 

???????? If you're considering buying the dip, note that the crowd is anticipating a rebound themselves. Ideally, one of these dramatic dips is met with FUD and panic. Historically, most turnarounds occur immediately after the average traders have given up hope on crypto. pic.twitter.com/6St0yzefnB

— Santiment (@santimentfeed) July 8, 2024

At least in the short term, the market did recover, taking some assets up more than 10% in 24 hours. The current calls contradict the data from the crypto fear and greed index, which dipped to 27 points, the lowest since 2022. 

Yet this time, the market is in a much better shape compared to 2022, with most major assets recovered and relatively close to their all-time highs. The last time the index was under 30, Solana (SOL) had already dipped close to its lows under $10.

Is the market bottom already realized?

The big question of sentiment is whether the market bottom has already happened. BTC sank as low as $53,000 and has not repeated that range in the past week. Additionally, some of the biggest liquidations for BTC traders are already completed, leaving the asset to rise. 

According to Santiment, the recent market crash already caused a capitulation of some holders, switching the coins to other whales. 

???? There are currently 54.09M non-empty Bitcoin wallets on the network, dropping by a net of 566K since June 15th. Patient bulls should be pleased with this, as self-liquidating wallets from impatient non-believers is a sign of FUD-causing bottoms, just like we saw in January. pic.twitter.com/h2jK9YvCf9

— Santiment (@santimentfeed) July 9, 2024

At the current price, year-old wallets have only very slim gains of 1.8%. According to Santiment, this may be a bullish signal for a trend reversal, similar to the rally above $20,000.

During all of the recent market shakedowns, the coins sold often ended up in large-scale wallets with more than 10K BTC, the biggest beneficiaries of the latest market correction.

Bitcoin sentiment shifts quickly

BTC has returned to slightly higher volatility, which means sentiment can shift quickly. During this bull cycle, the leading asset did not reach the predicted all-time highs, but remained healthier than ever. Markets showed they can absorb selling from miners, whales, as well as government wallets. 

Even ETF buying returned quickly, after more than a week of net outflows. 

Fidelity leads the way with $BTC ETF inflows
Grayscale coming in second
Followed by Ark and Bitwise

Smart money buying the #Bitcoin dip???? pic.twitter.com/qdS5pMJGl7

— Eric | Selected Investments (@SelectedInvests) July 9, 2024

Additionally, the 2024 market did not see the same levels of hype and trading volumes as in 2021. At the same time, the market is well supplied with stablecoins, and decentralized finance manages to tame volatility for now. 

One of the tell-tale signs of a healthy market is the behavior of retail investors. In previous bull cycles, the Coinbase app rose to the top in terms of downloads. The 2024 cycle has not created such a craze. VC funding, token sales and new launches are also at a lower baseline level. 

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During the current cycle, ETH prices are also seen as an indicator of market moves. ETH traded at $3,081.56, after recent signs of selling from whale wallets. But ETH returned to stability quickly, supporting its decentralized finance ecosystem. 

Sentiment for ETH shifted, as crowd money became more bearish, while smart money showed cautious optimism.

Cryptopolitan reporting by Hristina Vasileva