"With most things, the average is mediocrity. With decision making, it's often excellence. You could say it's as if we've been programmed to be collectively smart" - James Surowiecki.
If there is some truth to this, why not gauge the overall opinion and see if we are collectively smart? Or if it turns out we aren’t, we can at least gain an understanding whether the market is greedy or fearful.
This is what the AltcoinAnalytics crypto sentiment indicator aims to capture. By means of continuous polling and big data analytics, an indication of sentiment is calculated. Everyone can participate and see the results on a daily basis via Telegram, but more on that later. First a short analysis of most recent polling results.
Over the course of several weeks, three questions on sentiment are posed, namely:
1. What probability do you give to the crypto market cap being higher in one month?
2. If you won 1000 USD, what percentage would you invest in crypto?
3. What probability would you assign to bitcoin being below 1000 usd in 6 months?
The chart shows the weekly average response to these questions, with the shaded area representing the standard deviation around that mean. In this way an indication of average sentiment over time is shown (solid line) along with the consensus of the population on that average (shaded area).
One can see that the average of people in the crowd predicting a higher crypto market cap rises from week 48. This can be interpreted as sentiment increasing, and the increase is gradual until the most recent observation. Along with the rise in polled sentiment on question 1, we can also see more dispersion, as the shaded area becomes wider. Interestingly the market index also recovered slightly after this change in sentiment.
To gain even more insight, we can also look at the individual votes per survey question. This is done by means of a boxplot per week, with all individual votes plotted. The graph below shows the breakdown on question 1. Red dots are the individual responses, the centre of box is the median response, edges of the box are the first and third quartile responses. Finally the whiskers show the outliers of the distribution.
The graph shows in more detail what was shown in the first graph.
On average, people are getting more positive. However with the rise comes more dispersion in answers. More responses are certain of a rise in the coming month (response = 100%), but more responses are also certain it won’t happen (response = 0%).
Whether or not you believe in wisdom of the crowd, this is valuable information. If you want to invest countercyclical, this is an important bellwether for sentiment. If you believe in the wisdom of the crowd then you can pay attention to the trends over time.
The analyses and polls are available on a daily basis. Access is open to everyone and works on the principle that if you contribute to the information you can also benefit from it. In order to see the analyses you first share your view on the markets by means of answering 3 short questions. To participate you can start a chat with the dedicated Telegram chatbot by following this link: http://t.me/Crypto_sentiment_bot or by adding the Crypto_sentiment_bot on Telegram.