Social media was abuzz with references to a cryptocurrency "crash" when Bitcoin's price dropped to $60,000 on February 5, triggering an immediate price rebound, according to Santiment data.

The sentiment analysis platform found that when traders announce a crash rather than simply observe a price drop, prices typically hit their lowest point and reverse course.

Bitcoin
Bitcoin
3.83%
Bitcoin's stock price has risen 13% from its low of $60,000 to $67,000 today. However, mainstream media continued to amplify crash narratives even after the recovery had already occurred.

Santiment noted that this delay allows major stakeholders to buy from panicked retail investors who are selling at a loss based on trailing short-covering.

Arthur Hayes, co-founder of BitMEX, attributed the sell-off to traders hedging related to iShares Bitcoin Trust's structured products rather than natural selling pressure.

 

Signs of a cryptocurrency crash are reliable indicators of price bottoms

Santiment data showed frequent spikes in "down" signals on social media during January, with January 26th seeing a surge in comments about cryptocurrency price drops.

https://twitter.com/santimentfeed/status/2019838721323917341

These signals are considered bottom indicators, but they don't trigger the extreme panic associated with crash announcements.

"Down" signals typically occur when prices fall enough to warrant holding without triggering mass sell-offs.

"Crash" signals appear when panic selling begins, with traders capitulating and selling off large quantities of assets at significant losses.

The drop on February 5th to $60,000 crossed the threshold where traders moved from simply observing a decline to declaring a crash.

 

Hayes links the price cuts to hedging using structured products in the iBIT scheme

Arthur Hayes wrote on X that the Bitcoin price drop may have been caused by brokers hedging their iShares Bitcoin Trust structured products rather than an underlying sell-off.

Banks issuing structured bonds linked to the iBIT scheme create hedging requirements that can cause rapid price movements as traders adjust their positions.

Hayes stated that he is compiling a comprehensive list of bank-issued securities to identify tipping points that could lead to sharp price spikes or drops. He wrote, "As the rules of the game change, you must change too."