Over the past two weeks, the sentiment in the cryptocurrency market has shifted dramatically, with traders moving from optimism to pessimism. This change in mood has resulted in a significant adjustment in market capitalization, particularly in altcoins.

As interest in meme coins like Dogecoin wanes, Bitcoin is experiencing a revival in social dominance, indicating a larger shift back to the leading cryptocurrency. This increasing phase of fear, uncertainty, and doubt (FUD) is a natural part of the market cycle. Smart traders can use this 'blood on the streets' environment to position themselves for potential future gains.

The social dominance of Bitcoin is increasing: Its significance for the market

Santiment data shows a clear trend of social dominance for Bitcoin. As the price of Bitcoin continues to attract the attention of traders, social conversations about cryptocurrency have increased.

The social dominance of Bitcoin reflects this growing trend, indicating that more traders are refocusing on Bitcoin as a safer, more established asset in uncertain market conditions. Meanwhile, the social dominance of meme coins has declined, as shown by the purple line. This decline suggests a waning interest in speculative assets, especially during periods of market volatility.

Market reactions and liquidations: A closer look at the data

The price volatility of Bitcoin is closely tied to changes in trader sentiment. The BTC price chart shows volatility between upward trends and short-term corrections, closely correlating with changes in social dominance.

Moreover, liquidations play a crucial role in assessing market sentiment. Recent data shows a significant increase in short liquidations, particularly during price surges. Large short liquidations were recorded in early August, late November, and early December, indicating that many traders betting against Bitcoin were caught off guard during these price increases.

In contrast, long liquidations occur during price corrections, with notable events in mid-September and late October. These spike liquidations, observed in both short and long positions, reflect the market's excessively high leverage. Liquidation levels typically range from $60 million to $100 million but can spike over $200 million during extreme volatility, as seen in early August and December.

Technical indicators and current outlook for Bitcoin: Where do we go from here?

As of the press time trading at $95,851.34, technical indicators are currently showing mixed signals. The Relative Strength Index (RSI) is currently at 41, indicating weak momentum, although it is not in the oversold territory yet.

A further drop below 30 could trigger a recovery, especially if the market reacts to a more favorable macroeconomic environment. The Moving Average Convergence Divergence (MACD) shows a bearish momentum, with the MACD line below the signal line. However, the smaller size of the chart bars indicates that selling pressure is easing, potentially signaling a shift towards stability.

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