The Effect of News on Bitcoin Prices

Updated: Nov 11, 2019

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They say there is no such thing as bad publicity as long as they spell your name right.  To a certain extent that has been true about Bitcoin (BTC) and cryptocurrencies in general.  Some early hacks of exchanges and other statements by regulators have quickly thrown a bucket of cold water on the crypto market and given people looking to finally dip their toe in the crypto waters a moment of pause.


The silver lining was that digital currencies and the underlying blockchain technology continued to get more and more mainstream media news coverage and consequently exposed more of the masses to the good, the bad and the ugly of crypto.  With any new disruptive technology or idea, there will always be plenty of critics and doubters who will seize upon bad news to say: “I told you so.”



In the early days of Bitcoin, positive or negative news made a huge impact on the price of BTC and other cryptos.  Over time this impact has lessened, but still can cause significant ripples across the crypto landscape and create price volatility just as it happens with news relative to traditional securities like stocks.  

Most of 2019 has been quiet with little significant news that could impact price, but there are a few newsworthy events that sent seismic shockwaves across the cryptocurrency landscape.


June 18, 2019:   Facebook announces Libra 


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While the rumors were swirling in May that Facebook intended to launch their own cryptocurrency, it did not become official until June 18th with the publication of the Libra whitepaper.  For most of 2019, prices had been moving sideways with no significant breakouts in price. Facebook’s intention to bring cryptocurrency to the 2 billion people around the world on the platform clearly has been one of the news events that made a huge impact on Bitcoin at the time.


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Late June breakout of BTC price and trading volumes. Source: CoinMarketCap

The news created buzz, excitement, and speculation that ignited an 8-day winning streak that saw Bitcoin top out at $13,622.02 on June 26, 2019.  This represented an 18-month high. While this was not the wild ride that BTC saw on it’s way to $20,000 at the end of 2017, it did create renewed interest in a more mature cryptocurrency marketplace that was seeking signals of increased adoption.


October 25, 2019:  China’s President Xi endorses blockchain development


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While many noted the semantics of Xi’s announcement were focused on blockchain and not cryptocurrency, investors around the work took notice and went on a buying spree that resulted in a net 15.61% increase for the week.  A look inside the numbers during the week demonstrate the shockwave Xi’s comments made on the global crypto market. On Wednesday prior to his comments, BTC prices slipped below $7,300, a five-month low. Following his statements prices skyrocketed 42% to $10,350 during trading on Friday.


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Chart of the recent 42% increase in BTC price. Source: CoinMarketCap

While the bulls celebrated, many others speculated that in the long run this may actually turn out to be bad news for cryptocurrencies in general.  A highly centralized, authoritarian government embracing blockchain and potentially digital currencies? It is most likely that the Communist Party in China will use this technology to make sure it retains tight control over citizens digital lives and be able to monitor and censor it citizens even more than they do already.  Either way, advancement and further adoption of blockchain and cryptocurrencies increase.


What other types of news can create Crypto shockwaves?


It is fairly obvious that announcements and news from the largest social media platform in the world and the leader of the most populated country on earth will move the needle in the cryptocurrency market.  As this new digital currency frontier continues to mature, more mundane news has the potential to create smaller scale movements that could represent opportunities for investors. 


Regulatory announcements surrounding the use and oversight of cryptocurrencies and other digital securities have and will continue to make waves in the market.  The highly anticipated approval of the first Bitcoin ETF seems to be the tidal wave everyone is waiting for to create a massive infliction of institutional investment that could make $20,000 BTC look like a good position.  


Even though the SEC rejected the latest proposal for Bitwise’s proposed Bitcoin ETF, this recent effort represents progress towards what all experts believe will happen.  The question is not if, but when.  


Summary


Important news and cryptocurrency markets have much in common. Breaking news is delivered from around the world almost instantaneously while Cryptocurrencies are traded 24/7/365.  Blink and you can miss it. Information is power, but a strategic response to timely information is profitable in the hands of a skilled and deliberate investor.  


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