The crypto market capitalization has fallen more than 20% year-to-date. In February, investors are divided over whether prices are approaching a local bottom or whether the broader bear market still has room to run.
Amid persistent volatility and growing uncertainty, a key question remains: when is the right time to buy the dip? Analytics platform Santiment has outlined 5 signals to help traders.
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Are Traders Missing Buy Signals During Market Fear? Santiment Shares 5 Signals
According to Santiment, the first indicator comes from extreme negative social sentiment. By measuring the balance of pessimistic and optimistic language tied directly to specific assets, traders can better filter out noise and identify moments when fear dominates discourse.
Sharp spikes in fear, uncertainty, and doubt (FUD) and pessimistic commentary across social media in past instances have been followed by market rebounds.
Negative Commentary as a Dip Buying Signal. Source: SantimentAnother signal comes from tracking mentions of phrases such as “buy”, “buying”, or “bought” in association with the word “dip.” While these mentions increase during sell-offs, Santiment cautions that this metric alone is unreliable. This is because markets can rebound before retail traders fully capitulate.
A more telling sign, according to the platform, is the shift in language from “dip” to more extreme terms like “crash.” When catastrophic language begins to dominate discussions, it suggests fear-driven capitulation.
Santiment also highlighted the value of monitoring trending bearish keywords. This includes “selling,” “down,” or narratives suggesting assets are “going to $0,” which often emerge when retail confidence breaks.
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The final signal comes from on-chain data, specifically the 30-day Market Value to Realized Value (MVRV) ratio. This metric measures whether recently active wallets are, on average, in profit or at a loss.
When MVRV enters the “strongly undervalued” zone, it indicates that the most recent buyers are underwater. This condition could precede market rebounds.
The analysis stressed that defining what constitutes a “dip” largely depends on market context and the timeframe a trader is operating on. A short-term move of around 1.7% may present an opportunity for hourly swing traders.
Nonetheless, the platform noted that most market participants tend to react on a weekly basis. This better reflects the realistic trading bandwidth of the average trader.
Rather than relying on intuition or “anecdotal things,” the firm argues that objective data offers clearer insight into when fear-driven sell-offs may be nearing exhaustion.
It is worth noting that buying decisions ultimately depend on individual investor preferences and time horizons. While Santiment’s signals can help identify periods of heightened fear and potential opportunity, they do not guarantee that a market rebound will follow.
At present, many analysts suggest that the broader bear market may still have room to run. This means that prices could remain under pressure for longer.
As a result, decisions to buy or hold should be guided by each investor’s risk tolerance, strategy, and opportunity cost considerations.
Source: https://beincrypto.com/crypto-buy-the-dip-signals-santiment-analysis/
