How to gauge the public sentiment in the crypto and stock markets?

How to judge the public sentiment in the cryptocurrency and stock markets. This is a quite interesting topic, very practical whether in speculation or investment, especially in speculation. In value investing, however, judging public sentiment is not the core consideration.

Because in value investing, the main focus is on the margin of safety. The margin of safety is based on value, making judgments about the intrinsic value of a company. If the price falls within the margin of safety, it’s a good time to buy; the larger the discount, the better. Of course, judging public sentiment also has certain guiding significance in value investing. Generally speaking, when the public is extremely fearful, the prices in the crypto and stock markets are usually at their lowest.

As value investors, when encountering such situations, we naturally hope to buy at the lowest possible price, because it allows us to buy more crypto and stock market shares with the same amount of money. Judging public sentiment actually involves a certain predictive function; it can be grasped and utilized to some extent. I have also said before that in the crypto and stock markets, try not to predict the market, but based on my past experience, it can be somewhat grasped. Judging public sentiment also helps maintain rationality. It’s not only related to buying decisions but also helps keep us rational during the holding period.

When you determine that the public is acting irrationally, you should be alert to whether you are also in this irrational state. My usual approach is contrarian investing, which allows for low-cost entry. Logically, only when the public is irrationally selling can value investors buy at even lower prices. Usually, this is when the public is panicking. This is the topic we are discussing today—judging public sentiment in the crypto and stock markets.

There are generally three methods to judge public sentiment: The first method is to observe mainstream media, such as television, newspapers, and other traditional media. Why look at them? Because these media serve the public. Media care about ratings, which are their main source of income. The content and viewpoints they present are not necessarily accurate; they don’t care much about that. After a market crash, the public usually experiences emotional fluctuations, filled with pessimism and anxiety. At this time, they want to find reasons for the decline, so they watch TV, read newspapers, and other media. Traditional media are easier sources for the public to obtain information. From the perspective of media editors, the content they produce must be what the public is interested in.

If the public’s current mindset is fear, the content and viewpoints they produce tend to be pessimistic, which can confirm the public’s thoughts. As individuals, people hope others will confirm their views rather than argue with them. So, media tend to cater to the public’s psychology. Similarly, when media think the public is optimistic, their viewpoints are usually optimistic too. We cannot see each person’s emotional state directly, but we can easily tell if the media are pessimistic or optimistic. If the media are optimistic, the public is likely optimistic; if the media are overly optimistic, the public probably is too. At this point, the prices in the crypto and stock markets may be high, and the risks could be greater. Conversely, if the media are extremely pessimistic, we also know the public shares that mindset. Therefore, the first method is to indirectly understand public sentiment through the attitude of the media. To know where the wolves are, you look for the sheep; where the sheep are, the wolves are.

The second method is to use oneself as a reference to infer the public’s sentiment—using your current mindset to estimate the public’s mood. We are humans, part of the public, driven by the same DNA, with similar emotional fluctuations. When we face panic, market prices, and news, the hormones produced physiologically are the same. When we input (see the crypto and stock prices and face media output), our physiological and psychological processes are consistent, and the emotions reflected are also consistent. If we can consciously recognize our emotional state, we can use our current emotions to infer the public’s current mood.

The above two methods are indirect. The third method is to observe social media, forums, and other platforms, to see their emotional states and cross-verify with the previous two methods. Judging from these three perspectives, if the conclusions are consistent, then the accuracy and probability of the conclusion are quite high.

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