Sentiment-Price Divergence

Sentiment-price divergence occurs when the market's mood, as measured by indicators, contradicts the actual price movement of an asset. For example, if prices are rising but social sentiment is becoming increasingly negative, it may signal that the rally is nearing exhaustion.

Conversely, a price drop accompanied by extreme bullish sentiment can indicate a lack of conviction in the downtrend. Identifying these divergences is a classic contrarian trading technique used to spot turning points in the market.

It requires a deep understanding of both technical price data and behavioral sentiment metrics. In crypto, these divergences can persist for long periods due to the high level of retail speculation.