re: Official CryptoTalk Thread

With BTC, these are consolidations and "whipsaw" actions closely associated with momentum or trend trading. I trend trade a basket of commodities futures using MDA crossovers to position long or short, and the price action with BTC and ETH is similar but with higher beta. Willy Woo and Plan B obviously use a different set of metrics with BTC, but in essence they are attempting to predict the trend or momentum using their on-chain analysis. Its not perfect, but its math/statistics based and provides upside compared to just reading articles, press releases and project roadmaps and thinking you're an investing savant.

Another approach - which I find to be more true to the concept of momentum/trend trading on price - is to use a sentiment instrument like VADER to empirically score sentiment and weight your investment on how strong your sentiment score is negatively or positively.

I use TwitterScraper, LangDetect, and VADER to score sentiment on a daily 24 hour lag. The inputs are a lexicon of keywords (29 in total) that forms the dataset. VADER then scores sentiment at +5 to -5, then its statistically normalized to +1 to -1 to eliminate noise.

The secret sauce is the lexicon of keywords, but also there is a window of four days from (X) days of the sentiment score where sentiment becomes a statistically significant, contra-indicator of price action (e.g., negative sentiment = positive price action, positive sentiment = negative price action). This approach isn't perfect either, but it provides much greater upside than doing nothing at all, or going on gut-feel.

VADER is Open Source: VADER Sentiment Analysis Instrument