Just as internet software has eaten away at the world for the past 30 years, the new paradigm that eats away at finance could be all that cryptocurrencies themselves are cracked up to be.
On the other hand, the cryptocurrency market can be turbulent. The prices of digital assets are rarely driven by fundamentals, they are often driven by hype, and can fluctuate wildly depending on what is spread on the news and social media on a daily basis.
We got a taste of this earlier this week. Analysts at Matrixport put a damper on the widely held belief that the SEC will soon approve the first U.S. spot Bitcoin ETF, correlating with the sudden 10% collapse in Bitcoin (BTC) prices. He pointed out that he was showering her with water.
The decline caused the entire crypto market to collapse in just a few hours, resulting in $500 million in liquidations across derivatives exchanges, the worst liquidation in months.
Bitcoin has mostly rebounded since then, but not everyone believes the Matrixport post that went viral on X was the direct cause of the market crash.
In any case, news headlines, both real and fake, have amplified the trademark volatility of cryptocurrencies over the years.
The chart below plots cryptocurrency price trends around major news events over the past six years or so. Each row represents a different news article, starting one week before the headline is removed and continuing until one week later.
The impact of each story can be seen near the center of the graph on day zero. The chart started off relatively modestly, but as each headline hit the Internet, the chart expanded significantly.
real news
Although our sample size is relatively small, two positive stories clearly correlate with rising Bitcoin prices.
Amazon posted a job ad for a blockchain and crypto lead in July 2021, ahead of Bitcoin's 5% rally the next day. The rate of increase peaked at nearly 27% in the following week.
Admittedly, the overall market was in the middle of a major bull cycle at the time, so it's hard to pinpoint the power of the Amazon job posting, no matter how many outlets covered the news.
A CoinDesk report last year detailing how close the world’s largest asset manager BlackRock was to filing for a spot Bitcoin ETF caused similar ripples at the end of the last bear market.
Bitcoin only rose ~3% the day after the news broke, but rose ~23% the following week, much of it due to BlackRock's actual filing the day after the CoinDesk article. This may be due to.
The negative news articles analyzed were similarly correlated with a decline in Bitcoin price.
The price of BTC is based on The Block's report that Binance's Shanghai office was shut down in 2019 after a visit by local authorities, in which Binance's former CEO Qiao Changpeng The stock fell nearly 11% in 24 hours after the company threatened to sue.
After China banned crypto exchanges in 2017 and in apparent reaction to a Business Insider report that revealed Goldman Sachs had shelved plans to open a Bitcoin trading desk the following year, Bit The coin fell by about the same level.
Goldman Sachs will reopen its desks in three years.
fake news
Cryptocurrencies can sometimes be plagued by fake headlines and rumors. Sadly, they also seem to wield power over prices.
Positive fake news articles analyzed were correlated with higher prices. After a podcast interviewee in August 2021 claimed that oil giant Saudi Aramco would soon start mining Bitcoin through flaring, Bitcoin rose as much as 9% in the week. Saudi Aramco quickly denied the story.
A week ago, a report in London media CityAM suggested that Jeff Bezos had instructed Amazon executives to adopt Bitcoin and even issue their own token.
The day after this post, Bitcoin soared as much as 15%, and shortly after Amazon rejected the report, causing Bitcoin to briefly relinquish its gains.
But again, both fake news have fallen in the heat of the 2021 bull market. The relationship between these headlines and Bitcoin price did not last long.
But last year, in October at the end of the crypto winter, Cointelegraph tweeted an unsubstantiated claim pointing to the SEC approval of BlackRock’s Bitcoin ETF.
Bitcoin quickly rose as much as 8%, but quickly rebounded once onlookers realized the tweet was incorrect. Despite the troubling scenario, for which Cointelegraph apologized later in the day, the market surprisingly withstood much of the rally, and then some.
Of the dozen or so headlines examined, perhaps the most influential came from a 4chan post claiming that Ethereum co-founder Vitalik Buterin died in a car crash in British Columbia. It was a rumor in 2017. This is believed to have caused a project insider to dump his ETH.
Ether fell by as much as 16% in the six hours after rumors of the car crash first emerged, and by as much as 21% in the following week.
Buterin finally proved he was still alive Post A photo of myself holding up a hash of a recent Ethereum block – a novel blockchain use case at the time.
These charts confirm how important it is to stay on top of current events in the crypto space, especially for those interested in taking short-term positions in cryptocurrencies.
Over longer periods of time, the effects of individual stories appear to be less significant. So it seems possible to either ignore the noise and hold for the long term, or focus on the constant newsfeed noise for quick trades. The latter is certainly much more stressful.
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