Market sentiment talking points:
– Retail traders are heavily long the main cryptocurrencies: Bitcoin, Ether, Litecoin and Ripple.
– From a contrarian perspective, that suggests the price risk is to the downside.
– In this webinar I took a look at the major cryptocurrencies as well as sentiment in other financial markets.
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Downside possible for Bitcoin, Ripple, Ether and Litecoin
Sentiment data show retail traders heavily long the major cryptocurrencies and from a contrarian viewpoint that suggests their prices could fall back. Here, for example, is Bitcoin.
Bitcoin Price Chart, Daily Timeframe (December 13, 2017 – May 13, 2018)
Bitcoin sentiment chart
Retail trader data show 74.5% of traders are net-long Bitcoin, with the ratio of traders long to short at 2.92 to 1. The number of traders net-long is 0.6% lower than yesterday and 4.7% higher from last week, while the number of traders net-short is 2.1% lower than yesterday and 16.2% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Bitcoin prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Bitcoin-bearish contrarian trading bias.
Resources to help you trade the forex markets
Whether you are a new or an experienced trader, at DailyFX we have many resources to help you: IG Client Sentiment data, analytical and educational webinars hosted several times per day, trading guides to help you improve your trading performance, and one specifically for those who are new to forex.
— Written by Martin Essex, Analyst and Editor