Influence of Good and Bad News on Cryptocurrency Prices
Now, in the beginning of the 21st century, media channels of all forms (including both the traditional and digital varieties) have reached their peak in popularity. No business or product can ignore the influence of media on the wellbeing of their products or offerings; both good and bad news can have a substantial effect on the value of a product or service, and cryptocurrencies are no different. While it is true that popularity and the creation of “buzz” are the two most important outcomes of media hype, it’s also true that cryptocurrencies are probably more sensitive to news than anything else. .
One of the reasons why cryptocurrencies are so sensitive to good or bad news is because unlike traditional currencies, they are not regulated by any authority. Therefore, any popular sentiment or point of view created due to positive or negative news directly affects their value. Since cryptocurrencies are usually mass-managed by people working in all parts of the globe in real-time, popularity and impression play great roles in increasing or decreasing their value. Here are some possible coincidences that make this theory a palpable fact.
The Biggest Bitcoin Price Surge: November 3rd week till December 3rd week 2017.
2017 was probably the most exciting and adrenaline-evoking year for people invested in the world’s most popular cryptocurrency, Bitcoin. To understand the rise of Bitcoin’s value, please check the following screenshot. As Google Trends suggests, the steep rise in prices started occurring on November 25, 2017.
As of 26 November 2017, Bitcoin was trading around US$9,250.00, an increase of about 2,400% since 2011. According to data from CoinDesk, Bitcoin rose more than eight percent to a record high of $9,484.91.
This was the start of the booming period. From there, Bitcoin reached the $20,000 mark in about one month (on December 26, 2017). How did such a bubble form in the first place?
To connect our theories, let’s check some of the news in that time-period. First of all, the month was full of positive talk about Bitcoin. Around Thanksgiving, most people in the financial world talked about the high gains from investing in Bitcoin. Retail investors propelled much of the Bitcoin rise. According to Coinbase, at least about 100,000 trading accounts were added to its platform around Thanksgiving holiday, taking its total number of users up to 13.1 million.
CNBC reported that CME, the world’s largest futures exchange was planning to list Bitcoin futures in the second week of December. Such acceptance was an important piece of good news for Bitcoin lovers. Although China’s recent ban on domestic cryptocurrency exchanges negatively affected Asian markets, most retail investors were more interested in earning a high return than paying any attention to what the government and regulatory authorities were doing.
Now, look at this screenshot that shows when the slump started to occur, just as quickly as the rise began.
It was about after one month after the beginning of the rise. By the end of the third week of December, a sudden slump started to occur in the price of Bitcoin. Without a doubt, this was one of the most significant slumps in the history of Bitcoin.
What could be the reason for the burst of the Bitcoin bubble? As soon as Bitcoin prices started touching the skies, the non-believers, government authorities, sceptical celebrities, and noted people from the finance and business communities started attacking the Bitcoin industry. Among them were JPMorgan boss Jamie Dimon and Goldman Sachs’s Lloyd Blankfein, as well as Joseph Borg, the director of the state of Alabama’s securities commission; Paul Donovan a chief global economist at the Swiss bank’s asset management arm, was also among them. .
To understand the overall value of media, just read this: according to a Bloomberg report, “buy Bitcoin” had crossed “buy gold” as an online search phrase in November 2017. In December the same year, Bitcoin platforms just grew insanely in the app charts. Coinbase became the top trending app in the Apple App Store during that phase too. Moreover, two platforms that broadly oversee various cryptocurrency accounts (namely GDAX and Bitcoin Wallet) became the fifth- and eighth-most popular terms in the digital trending charts.
On the day Bitcoin first hit $10,000, the Financial Times placed Bitcoin on its front page, describing its 850 percent increase in value since January 2017.
Image Source: https://www.reddit.com/r/Bitcoin/comments/7g2rcn/the_uk_financial_times_front_page_this_morning/
This is just one example of the process that snowballed in various media platforms to make a positive sentiment about cryptocurrency. In no time, the mass population started to believe that Bitcoin was probably one of the best instruments to grow money in leaps and bounds.
Whether Bitcoin is a bubble or not is a matter of research and opinion. Although so called “grey markets” are being run on the digital currency, there is no reason to believe that cryptocurrencies are all a source of crime-funding and illegal to be allowed to run in the popular financial transaction systems.
2018: A Year Full of Regulations and ‘Thumbs Down’ to Cryptocurrencies Around the World
The cryptocurrency markets have remained somewhat flat and lower than expected limits in the first four months of 2018. While the US has been in a mixed mood, many countries (such as China, South Korea, Canada, and Venezuela) have clipped the wings of the world’s most popular cryptocurrency, Bitcoin. The story is somewhat similar in case of other popular digital currencies.
Endnote:
There is no proof of the argument that news has any instant or direct effect on the popularity or price of popular crypto features, especially on Bitcoin. However, public sentiment has a lot to do with the popular media views, and hence, there is strong evidence to suggest that news — good or bad — has an effect on the prices of cryptocurrencies.
There are myriad platforms to discuss and analyze the popular talks in the social media “grapevine.” Hence, the effectiveness of ‘word of mouth’ and popular discussion trends in social media are also quite noticeable in building (or tearing down) the price and popularity of cryptocurrencies.
Sincerely yours,
CINDX Team
