XRP & Litecoin See Social Media FOMO: Bad Sign For Prices?

3 months ago 31

Data shows that users on social media are overwhelmingly showing FOMO towards XRP and Litecoin, something that could be a bearish sign for their prices.

Weighted Sentiment Has Spiked For Both XRP & Litecoin Recently

According to data from the analytics firm Santiment, LTC and XRP are among the coins that have seen an improvement in sentiment following the recent price recovery. The indicator of interest here is the “Weighted Sentiment,” based on two other metrics: Sentiment Balance and Social Volume.

The Sentiment Balance tells us about the current net sentiment on major social media platforms. This indicator works by putting posts/threads/messages related to a given coin through a machine-learning model to identify whether they are positive or negative.

Once the metric has found out the number of posts of each type, it takes their difference to determine the net situation around the asset on social media.

There is perhaps one flaw in the Sentiment Balance, though, and it’s the fact that it contains no information about how many users share this sentiment. Sometimes, discussion around the cryptocurrency can be low, so whatever the metric would signal would only correlate to what the few users talking about it think, which may not necessarily relate to the majority.

The Weighted Sentiment fixes this problem by also incorporating Social Volume data. The Social Volume keeps track of the degree of talk that any given asset receives on social media platforms.

Thus, the Weighted Sentiment only registers a spike (in either direction) when not only does the Sentiment Balance have a high value but also the Social Volume is signaling the presence of high discussions.

Now, here is a chart that shows the trend in this metric for Litecoin and XRP over the past month:

As displayed in the above graph, the Weighted Sentiment has seen spikes into the positive territory for both XRP and Litecoin with their recent price surges. This suggests that many positive posts have appeared around these coins.

Historically, highly positive sentiment has been a bearish sign for any asset, with tops becoming probable as investors FOMO. The chart shows that XRP had seen a rise in FOMO earlier in the month, and the cryptocurrency had set a top alongside this spike.

As such, the latest spike in the Weighted Sentiment may not be ideal for the recovery runs that XRP and Litecoin have started. “These coins can continue to rise, but the crowd’s euphoria toward these assets could make them high-risk, high-reward investments this week,” notes the analytics firm.