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Crypto Terms:  Letter S

What is Sentiment?

Meaning:
Sentiment - the general feeling that traders and investors have about a particular asset's price action.
easy
2 minutes

Let's find out Sentiment meaning, definition in crypto, what is Sentiment, and all other detailed facts.

The term sentiment is also known as market sentiment. It's a subjective opinion about a market's state. It’s usually influenced by a number of elements including information collected from fundamental analysis (FA) and technical analysis (TA) indicators. In addition, sentiment can also be influenced by price history and recent news.

It might seem that market sentiment and fundamental analysis are almost the same things, it's not true though. The fundamental analysis is primarily concerned with a company’s performance. This includes the company's reputation or its market cap. The sentiment, on the other hand, is linked to emotions and psychology.

Market sentiment is perceived as an excellent predictor of short-term and mid-term price fluctuations. The market tends to change direction when the sentiment is too bullish or too bearish. To put it another way, when the majority of traders are pessimistic, the market tends to rise. However, when the overall sentiment is more positive than it usually is, the market tends to fall. 

As a result, market sentiment can be used as a contrarian indicator. If the majority of people are positive, contrarian traders might consider shorting or selling. However, they might contemplate buying or initiating a long position if the sentiment is extremely pessimistic.

Overall, market sentiment is the outcome of two key emotions – greed and fear. Both emotions tend to drive the financial market. To monitor that, you can use the Fear & Greed Index.