Nearly half of the cryptocurrency mentions on social media this week focused on Bitcoin, as the price reached a new all-time high (ATH). However, the high dominance level could be a sign of a local price peak and the possibility of a short-term correction.
"When Bitcoin's market value first surpassed the $123,100 milestone in its 17-year history, its dominance on social media also surged to a similar historical peak," said analyst Brian Quinlivan from Santiment in a report on Wednesday.
The explosion of discussions about Bitcoin leads to price corrections.
"43.06% of all discussions related to cryptocurrency revolve around BTC, right at the time this coin's market value peaked. The sudden surge indicates that many retail investors are FOMO (fear of missing out) jumping in," Quinlivan stated, countering the views of some other industry experts who believe that retail investors have not truly participated in the market.
On July 11, Bitwise's research director, André Dragosch, stated that although Bitcoin is at a record high, "retail investors are almost absent."
Just 3 days later, Bitcoin reached a new peak of $123,100 before dropping to $117,898 at the time of writing.
Quinlivan stated that while the increased positive sentiment seems like a good sign, history shows that spikes in Bitcoin mentions on social media are often accompanied by subsequent price corrections.
"Wait for this bullish sentiment to cool down, and you might find the next important entry point," he said.
The warning was issued after Quinlivan noted that the strong increases in trader optimism on June 11 and July 7 both led to Bitcoin price drops.
Analysts remain optimistic about Bitcoin's upward momentum.
However, some analysts believe that the upward trend will continue.
On Wednesday, CryptoQuant analyst Axel Adler Jr confirmed that there has been no signal of a 'Bitcoin peak' — an indicator that often signals an overheated market — meaning "we are not at the peak yet."
Meanwhile, Michael Harvey, trading director at Galaxy Digital, predicts that Bitcoin may enter a short consolidation phase after the strong surge to new highs, but likely will continue to rise before the end of July.
"I believe the current base scenario is that prices will consolidate around this level after a big increase and a new peak," Harvey said.