Data shows that users on social media are showing a significant fear of missing out on XRP and Litecoin, which could be a bearish sign for their prices.
Sentiment has been rising for both XRP and Litecoin recently.
According to data from the analytics company saintLTC and XRP are among the coins that have seen an improvement in sentiment following the recent price recovery. The indicator of interest here is “weighted sentiment,” based on two other metrics: sentiment balance and social volume.
The Sentiment Balance indicator tells us the current net sentiment on major social media platforms. This indicator works by putting posts/topics/messages related to a particular coin through a machine learning model to determine whether they are positive or negative.
Once the metric has discovered the number of posts of each type, it takes the difference between them to determine the net position around the origin on social media.
But there is perhaps one drawback to the sentiment scale, which is that it does not contain any information about how many users share those sentiments. Sometimes, discussion about a cryptocurrency can be low, so anything the scale indicates will only relate to what the few users who are talking about it think, which may not necessarily apply to the majority.
The Weighted Sentiment Index solves this problem by incorporating social volume data as well. The Social Volume Index tracks the degree of talk that a given asset receives on social media platforms.
Thus, the weighted sentiment index only registers a sharp rise (in either direction) when not only is the sentiment balance high, but the social volume also indicates high discussions.
Now, here is a chart showing the trend in this metric for Litecoin and XRP over the past month:
As shown in the chart above, sentiment has been trending higher in the positive territory for both XRP and Litecoin with their recent price increases. This indicates that there are many positive posts coming out about these coins.
Historically, extremely positive sentiment has been a bearish signal for any asset, with peaks becoming more likely as investors become fearful of missing out. The chart shows that XRP saw a spike in FOMO earlier in the month, and the cryptocurrency made a peak alongside that spike.
As such, the recent rise in the Weighted Sentiment index may not be ideal for the recovery waves that XRP and Litecoin have started. The analytics firm notes that “these coins may continue to rise, but the euphoria of the masses towards these assets may make them high-risk, high-reward investments this week.”
XRP price
XRP has seen a nearly 26% surge in the past week, bringing its price back above the $0.54 level.