Crypto itself may very well be all it’s cracked up to be – a new paradigm to devour finance in much the same way that internet software has eaten the world for the past three decades.
Crypto markets, meanwhile, can be a hot mess. Rarely driven by fundamentals and often by hype, prices for digital assets can swing wildly depending on what is spread daily across news and social media.
We saw a taste of this earlier this week. A Matrixport analyst note pouring cold water on the widely held belief that the SEC will soon approve the US’s first spot bitcoin ETF correlated with a sudden 10% crash in the price of bitcoin (BTC) .
The drop triggered a crash across parts of crypto markets within hours, along with $500 million in liquidations on derivatives exchanges – the worst wipeout in months.
Bitcoin has mostly recovered since then, but not everyone is sold that the Matrixport post, which quickly spread on X, was directly responsible for the market tank.
In any case, headlines for news, both real and fake, have reinforced the volatility of crypto’s brand for years.
The charts below plot crypto price action around major news events over the past six years or so. Each line represents a different news story and starts one week before the headline dropped and extends to one week after.
Each story’s impact can be seen around the center of the chart on day zero. The cards start out relatively calm, but they spread noticeably after each headline hit the Internet.
The real news
Our sample size is relatively small, but the two positive stories clearly correlated with higher bitcoin prices.
An Amazon job ad for a blockchain and crypto lead in July 2021 preceded a 5% bitcoin pump over the next day. This rally reached almost 27% over the next week.
Granted, the entire market was in the midst of a major bull cycle at the time, so the strength of Amazon’s job posting is hard to pin down, despite how many outlets picked up the news.
A CoinDesk report last year detailing how close the world’s largest asset manager, BlackRock, was to filing a spot bitcoin ETF caused a similar stir at the tail end of the last bear market.
Bitcoin rose just 3% in the day after the news broke, but rallied 23% in the following week, although much of that can be attributed to BlackRock’s actual filing one day after the CoinDesk article.
The analyzed negative news articles were similarly correlated with declines in the price of bitcoin.
BTC’s price fell nearly 11% in the 24 hours following a report from The Block indicating that Binance’s Shanghai office was closed following a visit by local authorities in 2019 (for which former Binance CEO Changpeng Zhao threatened to sue the store).
Bitcoin fell about the same after China banned crypto exchanges in 2017 and again in apparent response to a Business Insider report the following year that revealed Goldman Sachs had scrapped plans to open a bitcoin trading desk has.
Goldman Sachs would reopen the desk three years later.
The fake news
Crypto is sometimes plagued by false headlines and rumors. Unfortunately, they also seem to exercise power over prices.
The positive fake news stories analyzed were correlated with higher prices. Bitcoin rose 9% in the week after a podcast interviewer claimed in August 2021 that oil giant Saudi Aramco will soon mine bitcoin through flaring. Saudi Aramco quickly denied the story.
A report from London outlet CityAM a week earlier suggested that Jeff Bezos had ordered Amazon executives to adopt bitcoin and even launch their own token.
Bitcoin rallied as much as 15% the day after that post and Amazon rejected the report shortly after, causing bitcoin to temporarily give up those gains.
But again, both fake news items fell during the heat of the 2021 bull market. Any relationship between that news and bitcoin’s price was short-lived.
Last year, however, at the end of the crypto winter in October, Cointelegraph tweeted an unsubstantiated claim pointing to SEC approval of BlackRock’s bitcoin ETF.
Bitcoin immediately rose to 8%, but quickly bounced back once onlookers realized the tweet was incorrect. Markets surprisingly held on for most of the rally, and then some, despite the awkward scenario that Cointelegraph apologized for later in the day.
Of the dozen or so headlines studied, perhaps the most impactful of all was a 2017 rumor borne of a 4chan post claiming that Ethereum co-founder Vitalik Buterin had died in a car accident in British Columbia. This presumably led to project insiders dumping their ETH.
Ether crashed up to 16% in the six hours after the car crash rumor first broke, and up to 21% in the following week.
Buterin finally proved he was still alive by posting a photo of himself with the hash of a recent Ethereum block – a new blockchain use case at the time.
These charts reinforce how critical it is to stay smart about current events in the crypto space, especially for those interested in taking short-term positions in crypto.
Although over a longer period of time individual stories seem to have less effect. So it seems you can ignore the noise and hold long term or concentrate on the never ending hum of news feeds for quick trades. The latter is certainly much more stressful.
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Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
Ultimately, any crypto adventure you embark on is yours alone. We’re just happy to be your crypto companion, cheering you on from the sidelines (and maybe sharing some snacks along the way). So research, explore, and remember, with a little knowledge and a lot of curiosity, you can navigate the crypto cosmos like a pro!
UnCirculars – Cutting through the noise, delivering unbiased crypto news
