[DigitalToday reporter Jinju Hong (홍진주)] With the total cryptocurrency market capitalisation down more than 20 percent so far this year, investors are split over whether the market is nearing a local bottom. As volatility and uncertainty grow, analytics platform Santiment presented five signals to gauge when to “buy the dip.” Blockchain outlet BeInCrypto reported the details on Feb. 10 local time.

Surge in extreme negative sentiment, or FUD (fear, uncertainty and doubt) The first indicator is extreme pessimism on social media. It said rebounds have often followed when negative language around a specific asset surges and FUD dominates. It cited a recent case in which Bitcoin slid to around $60,000, then rebounded 19 percent within 24 hours after FUD spread. Santiment analysed that “the louder the voices predicting the end of crypto, the more paradoxically it can become a buying opportunity.”

Rising mentions of “buy the dip” An increase in phrases such as buy the dip is also an indicator to watch. Santiment warned, however, that this signal alone is less reliable because a rebound can come before retail investors fully capitulate.

Change in the intensity of language It is also important to see whether discourse shifts from a simple “decline” to catastrophic expressions such as “crash” or “collapse.” It said the point at which fear peaks and capitulation sentiment spreads often overlaps with a short-term bottom.

Spread of bearish keywords When keywords such as “sell,” “zero ($0),” and “total collapse” spread, retail investor confidence can be seen as severely damaged. It said this could be a signal that panic selling is nearing its end.

On-chain indicator “MVRV” (market value to realised value) Finally, it pointed to the 30-day MVRV ratio. When this indicator enters a strongly undervalued zone, it means recent buyers are, on average, at a loss, a zone that has historically been associated with higher chances of a rebound. By contrast, Santiment added that it is desirable to refrain from new buying in a strongly overvalued zone.

It said these signals do not necessarily guarantee a rebound. Some analysts are still raising the possibility that a broad bear market could continue. Ultimately, whether to buy should be decided after comprehensively considering each investor’s risk tolerance, strategy and opportunity cost.