Has the crypto market crashed? Look at these 5 key words

According to crypto research firm Sentiment, there are at least five keywords that could signal the crypto market is underperforming.

The price of Bitcoin (BTC) has fallen by 3% in the last 24 hours following the high geopolitical tensions in the Middle East. Crypto traders are concerned about what the rising conflict could mean for risk assets.

In a blog post on October 2, Brian Quinlavin, marketing director of Saniment, said that when the five main “fear” words are used frequently on social media, traders can help identify whether the market is overly fearful and prone to trouble.

Words that refer to the bottom sign

“When the market is down, people often start using certain words more frequently. These scary keywords, often referred to as ‘FUD' (fear, doubt, doubt) words, can indicate that things are about to turn positive,” says Quinlavin.

The first word is “crash”. When everyone talks about a crash, it usually means that prices have crashed, and traders have gone into panic mode. Ironically, when the word “crash” is mentioned a lot on social media, that's usually when prices start to reverse.

It's the same when you see the words “sale” and “dead” on social media. As with “crash,” when traders start chanting the words “sell” and “dead” more often, that usually means a recovery is on the brink, “creating opportunities for the heroes,” Quinlavin said.

A fourth fear keyword is “crackdown,” referring to regulatory and legal pressures that could cause traders to fear limited and government action or new or ongoing lawsuits.

“This fear can depress prices, but it often leads to good buying opportunities, especially when the panic seems excessive,” Quinlavin said.

Related: XRP price breaks 3.5-year low as analyst predicts $200

The fifth fear word is “liquidity”, which can be a double-edged sword depending on the direction of the market. Liquidity refers to traders being forced out of positions by sudden price movements, which can occur during periods of bullishness and distress.

Typically, investors on social media use the term “liquidity” to celebrate the fact that people shorting the market – price bets – stop and lose. Quinlavin added that short liquidation is “historically a great opportunity for new buyers to get in.”

Quinlavin concluded that taking a “contradictory approach” to social media sentiment is “often” the right decision.

“In very difficult times like the FTX collapse or the recent price drop where everyone seems to be on board the bullish or weak train, this generally paints a clearer picture,” he said.

Magazine: Bitcoiners are ‘all in' on Trump since Bitcoin '24, but it's getting dangerous.