Tracking Traders
What the language data reveals about Bitcoin’s most price-sensitive cohort.
Not everybody thinks about Bitcoin in the same way.
Over the last couple weeks I’ve been zooming out to a broader lens to give you guys a high-level read about how things are going on in the Bitcoin market. Which groups are bullish, which are bearish, and just how unique this current bear market is from a psychological perspective.
Today we’re going to do something a bit different.
We’re gonna zoom in.
People view the orange coin in a variety of different ways. Some view it as a balance sheet asset, others want to use it to buy fruit in the jungles of Costa Rica. I personally love this about Bitcoin. I think the thing that makes the asset beautiful is the fact that it aligns the incentives across different groups using it for different reasons.
But one group in particular views Bitcoin with a shorter time horizon than most.
Traders.
Love ‘em, or hate ‘em, there are a ton of folks in Bitcoin that care deeply about watching Bitcoin’s short-term price action. Many of these individuals have long term positions, but via their professions or interests they think about the moves that happen on the daily and weekly scales much more than those of us who are simply staying humble and stacking sats.
Because of this, the language data of this group is particularly interesting.
How confident are they?
What narratives do they care more about?
That’s exactly what we’re going to dive into today.
NOTE: Here is where paid subscribers are seeing a 10-minute long video covering my thoughts on Bitcoin Traders, a TL;DR of the piece, and a preview of the Sentiment Dashboard I’m rolling out later this week.
Conviction Crash Out
I started flagging this group at the beginning of July when I noticed that their conviction levels plummeted all the way down to lows not seen since February 2024 directly before the ETF run up.
“Wow, so you’re saying we’re about to moon?!”
Not so fast.
I’m often wary to lead with conviction because it can be a challenging sentiment signal to reason about. High conviction isn’t inherently bullish. Nor is low conviction. Conviction is a non-directional metric. Someone can be convicted and bullish or someone can be convicted and bearish, and to make things especially confusing not every group’s conviction language should be interpreted in the same way.
I know this sounds wildly confusing, but bear with me because traders are the perfect example of this concept.
HODLers are usually here for a good time, and towards tops they tend to get overly optimistic and highly convicted. No judgment. This is a natural human emotional state and I’m guilty too.
But traders are in a slightly different situation. Especially those who are publicly sharing their price predictions.
Try to take a moment to think about how it might feel in their shoes.
“No, that’s dumb, I only care about long-term Bitcoin fundamentals.”
Good for you.
But despite your own beliefs and worldview, I think we can still learn and grow by understanding/empathizing with how different individuals in that ecosystem think.
I personally think about conviction a lot while I’m writing these pieces because if I say something particularly stupid (above and beyond my baseline level of stupid) then it’s out there for the world to see.
When I wrote my piece last week about Fading the Four-Year Cycle I used “hedging” language a TON (the opposite of conviction). I did this for a couple reasons:
I don’t think what I was talking about was a super high probability outcome.
It was quite bold.
Bitcoin humbles all of us, and we sit at an incredibly interesting inflection point.
All these things combined led me to hedge my bets a lot.
Bitcoin traders are doing the same thing right now, and I can understand why.
Vibes are weird, macro is weird, BIP-110 is weird, CLARITY is weird, AI sentiment is weird, Iran conflict is weird.
There is a lot of uncertainly out in the world and despite some positive momentum in Bitcoin’s price recently we sit at some particularly interesting inflection points. I’ve heard traders make compelling arguments for large upside moves and I’ve heard traders make equally compelling arguments for large downside moves.
In my opinion this is why they are hedging so much.
Because we currently stand at the precipice of something and people don’t know what the hell comes next.
The price mention heatmap shows a similar pattern.
There has been a decrease in the broader mention rate of Bitcoin levels like $50k, $126k, and $150k that were much more frequently talked about in the past. But even more surprising is the lack of talking about some of the levels directly on either side of the current price.
We currently have a great deal of different important levels sitting directly above us right now that are also surprisingly absent from the public conversation.
The traders talk about these levels much more often than Bitcoiners more broadly, but even still their conviction around these conversations is lower.
Which brings us to the next interesting idea.
What are the traders talking about?
Talking Traders
As one might expect traders talk way more about price levels than the average Bitcoiner, but that’s not the only conversation piece that differs.
On the chart above you can see that Bitcoin Traders have been extremely interested in the CLARITY Act comparatively to the broader Bitcoin ecosystem.
I personally read that this is because they view this as the single biggest catalyzing narrative for short to medium term price action. There could be others, but this is by far the most distinctive outlier.
Contrast this to something like BIP-110, which has the opposite dynamic.
Those deeply embedded in the Bitcoin community are starting to talk about BIP-110 more frequently as the August 8th flag day nears, but traders in particular don’t seem quite as concerned. Which I personally read as them not caring quite as much about how this might impact price action.
For anyone that read Breaking Down (BIP-110) you’ll remember that I predicted that if BIP-110 proponents continued to aggressively prod Saylor, it was likely he would get involved in the debate and that the broader treasury company complex would too.
Well, that’s exactly what is now happening.
Here is the mention rate of BIP-110 across a handful of different cohorts that I track.
There’s a lot going on with this chart.
Put simply, this compares the mention rate of the phrase “BIP-110” across that group last week compared to the mention rate for “BIP-110” this week. This lets us visualize how the top groups are talking about the topic slightly more, while the bottom group is trending down a bit.
Most interestingly for our current line of thinking here, traders are the group that’s been losing interest in this debate the most rapidly.
I find this interesting because, once again, they are the group that cares the most when it comes to short/medium term price action.
Despite this debate coming to a head shortly, the group that should (in theory) care the most about short-term price action has started talking about it a bit less.
Closing Thoughts
We led off with how conviction is low but there are two important variables that I didn’t mention that are important to understand the broader psychological story behind this group.
Traders overall moods aren’t good.
Traders conviction is rapidly rising after the bottom in early July.
The above chart shows the amount of optimistic language traders have been using over time. It’s pretty muted. I’m not going to show every single chart, but across the set of positive/negative emotions traders skew more negative… but their conviction is now rising.
The aggregate conviction level is still quite low, but it’s nowhere near as crashed out as it was even a couple weeks ago.
From a short-term perspective (when I zoom in on the mood trends) I think they are growing more convinced of a downside move. From a long-term perspective (when I zoom out) I think they still feel very unsure what is going to happen.
Some traders think Bitcoin is going to crater. Some traders think we’ve already seen the bottom. But neither group is very confident in their predictions.
I do think the rapid rise in conviction coupled with their negative mood profile suggests that their conviction about the next move direction is slightly biased to the downside in the short term.
Regardless of where we move on the hourly chart, Bitcoin currently sits in a price range that is quite unique… and this isn’t just my opinion, but reflected in the language of Bitcoin traders.
“Well, then what is your opinion?”
For that, I’m going to adopt the same posture as these Bitcoin traders and hedge just a little bit, because I too have genuinely no idea what price is going to do in the short term.
But based on the fact that the crowd is emotionally washed out, people are angry, bored, and the infighting is raging on I personally have a strong contrarian bullish bias when it comes to Bitcoin’s long term price movements.
Thanks so much for reading, if you’d like to see the video breakdown at the top of this post or get access to the Sentiment Dashboard as soon as it launches consider becoming a paid subscriber.
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P.S. I offer bespoke narrative and sentiment analysis for businesses that want to better understand the moods, narratives, and psychology shaping their current and target audiences.
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Good stuff
Interesting.
I'm looking forward to hearing you do more about this trader cohort. I feel like it's interesting that they might be more near-term focused than previous groups.