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Bitcoin Sentiment Analysis

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The Bitcoin Sentiment Analysis is a measure of


whether individuals feel the digital currency's
prospects are increasing or decreasing on any given
day. Powered by data collected by FinSentS which
leverages mobile ad infrastructure to deliver
questions to millions of people across the globe,
the index provides a snapshot of the general
attitude towards bitcoin. Find out more about its
methodology in the presentation.

Wall Street's View


The China damper came the same day as some Wall Street banks released initial
coverage of the digital currency, showing they're treating Bitcoin as something more
than a passing fad. Let's look at a few reactions:
"We believe Bitcoin can become a major means of payment for e-commerce and may
emerge as a serious competitor to traditional money transfer providers," Business
Insider quotes from a note by Bank of America currency strategist David Woo. "As a
medium of exchange, Bitcoin has clear potential for growth, in our view."
"Is Bitcoin a bubble?" asks Woo. "Assuming Bitcoin becomes (1) a major player in both
e- commerce and money transfer and (2) a significant store of value with a reputation
close to silver, our fair value analysis implies a maximum market capitalisation of Bitcoin
of $US15 billion (1BTC = $US1,300). This suggests that the 100 fold increase in Bitcoin
prices this year is at risk of running ahead of its fundamentals.
Citibank also issued a note but its strategists are more sceptical, noting that Bitcoin
duplicates are easily made, which means that pricing the original Bitcoin becomes
difficult.
My conjecture is that we will see big speculative swings as different coins are created
and move in and out of fashion and some emerging concern that there is nothing to
anchor them and nothing to stop their proliferation, Citi says.

One Word on Price

The price (on Bitcoin exchange Mt Gox) plunged briefly 50 per cent from its top early
December from $US1240 to $US576 - before yoyo-ing back to above $US900 as we publish
this letter.
This is a sharp move, but in April this year the price soared over 200 then pulled back in a
$US50-150 trading range, so in relative term the drop was even bigger than the one we are
seeing right now! That is clear on a logarithmic scale as shown above. One may also notice
that volumes exchanged in April/May were way higher than what they are today.

News Volumes

So what has changed? The news coverage! Bitcoin is now mainstream, people are talking
about it, that is quite obvious in our News Volume (see above). From just an handful
articles detected daily early 2013, our FinSentS engine starts to show a massive spike in
the number of articles end March, nicely correlated with the rise of the price.
The news coverage has never been higher than lately, but the graphs shows several spikes,
approximately one by month: March-April first, then June, July, August, September, and a
more notable one early October.

Buzz Analysis

Another way to look at the news activity is the Buzz (or Velocity). Unlike volumes,
FinSentS Buzz score is a relative value (0 to 10) of the past 14 days.
On the chart above, we look at the 7 days moving average of our scores. 1/-6/ denotes
high buzz, and if you compare them with price you will see that they are generally
coupled with a high volatility and a steep rise or decline of the price. When buzz is low (79 above), it shows a lack of interest, and generally an erosion of the Bitcoin price.

Sentiment

On www.bloomberg.com, a recent query on Bitcoin was retrieving 220 articles, on


www.reuters.com, it was over 150! It is nearly impossible - and pointless to read all that! This is
the main interest of our sentiment data, it "summarizes" the news trends!
On the chart above we consider a 15 days simple moving average of our FinSentS sentiment
score. It also ranks from 1 to 10.
The latest point (10th October) of the SMA shows a sentiment of slightly below 4.5, and the the
daily score is 4 - even lower. The news around Bitcoin have deteriorated significantly lately!

The other extreme points were pretty significant:


1/-5/: High sentiment and rise of Bitcoin price;
6/ & 7/: Low sentiment and drop of Bitcoin price;
But 8/ indicates a huge divergence! Initially our score sentiment score is well
correlated with the drop of the price early October, but at 3 on a 15 days SMA, the
Bitcoin price seems to enter an over-bearish area that justifies further the huge
recovery that followed!
If we look at the latest points on the chart, we see that Bitcoin price and sentiment have
dropped, but with this level of hype will continue to hear about it for some time!!
This is of course a very brief and rapid overview of the type of analysis you can perform with
our FinSentS engine. To learn more, please simply register on our portal.

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