The value of Bitcoin and other cryptocurrencies has fallen sharply on the day, and BTCUSD fell below the psychologically-significant $10,000 mark amid the broader market sell-off.
A look at IG Client Sentiment warns that Bitcoin and other major cryptocurrencies may nonetheless continue lower. Our data shows the percentage of clients long BTCUSD has risen close to the highest-levels recorded—hitting 79 percent at time of writing. We use such heavily one-sided sentiment as a contrarian signal to price action, and the fact that traders long outnumber those short by nearly 4 to 1 acts as a clear warning of further declines.
Data source: IG Client Sentiment as shown on DailyFX.com
The overall number of clients long Bitcoin has literally never been higher, and that number has grown as BTCUSD has plummeted—rising 9 percent despite the 20+ percent decline in the underlying market.
And although we do not yet have comparable historical data for other major cryptocurrencies, current IG Client Sentiment readings for Ripple (XRPUSD at 97 percent long), Ether (ETHUSD at 95 percent long), and Litecoin (LTCUSD at 92 percent long) point to comparably one-sided extremes.
Until we see significant moderation, IG Client Sentiment will continue to warn of further declines in the previously high-flying cryptocurrency market.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
--- Written by David Rodriguez, Senior Strategist for DailyFX.com
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