Financial analysts are trying to create a standard of analysis to predict the price direction of the cryptocurrency market by using Forex and Commodity trading as a basis of comparison. The movement of the crypto market is also largely dependent on “news” or events happening in the real world – in the political and economic spheres, just to name a few.
It is challenging to evaluate the exact value of digital assets, be they cryptocurrencies or ICOs – there is no proven financial performance, or fundamental analysis like traders would do with stocks. Instead, the prices of cryptocurrencies depend on market sentiments and investor confidence. It is a market that is influenced heavily by emotions.
Mass adoption of cryptocurrency by the general public and also positive regulations towards the trading and use of crypto can cause prices to increase, but the opposite holds true as well. Negative news can cause investor confidence in the crypto market to decrease.
Examples of Positive News
Businesses are increasingly adopting crypto – This can refer to the adoption of Bitcoin or other cryptocurrencies in trade, to pay for products and services, or for these traditional businesses to even create their very own tokens for public use. This is especially the case when large and well-known multi- or transnational companies such as McDonalds, JP Morgan or Samsung announced that they are interested in using blockchain technology and cryptocurrency in facilitating transactions or even developing new systems.
Traditional financial institutions lending their support to blockchain technology and cryptocurrency – In recent months, there have been news of central banks all over the world adopting blockchain technology and improving processes such as payments and international transfers. Central banks have also begun to experiment with their own Central Bank Digital Currency (CBDC) and these developments all bode well for the crypto market in general.
News from Prominent Financial Instruments – A good example would be the NASDAQ Stock Exchange, which announced recently that it is preparing to launch its own cryptocurrency exchange. This is especially the case as there is a lot of attention on Exchange-Traded Funds (ETFs) that invest in cryptocurrency, and the more crypto exchanges and digital assets are accepted in the traditional financial industry, prices have the potential to be driven upwards dramatically.
Endorsements by Celebrities – Entertainment news also contribute to the overall perception of the crypto industry by the general public. While endorsements, like all advertisements, should be viewed with caution, celebrities and influencers can help to educate their followers on blockchain and cryptocurrencies, especially in the age of social media.
Regulatory Support – Economic policies and regulations can make or break the development of the blockchain and crypto industry in any country. In crypto-friendly countries, the public will have more freedom to explore cryptocurrencies and exchanges. However, in countries such as the United States or India where crypto-related laws are strict, owning cryptocurrencies may prove to be so much of a hassle that people may turn away from crypto altogether.
Examples of Negative News
Security Breaches on Crypto Exchanges – Whenever news that a crypto exchange has had its security compromised turns up, both members within and outside of the crypto community lose confidence in the exchange’s ability to secure their assets and money. In the short term at least, they may be less likely to trade, or may even sell off their crypto assets in a hurry as they fall back on fiat currency. It also serves as a deterrent for new traders looking to enter the crypto market.
Government Control – As mentioned above, governments banning crypto can have adverse effects on the crypto market. For example, China used to be the second-largest market for crypto trading and fundraising for ICOs, but after the government banned all cryptocurrency transactions, world market prices dropped sharply.
Negative Publicity – If well-known persons in the financial or banking industry, or even prominent political figures, deliver negative comments about the crypto industry, this can sometimes serve as a catalyst for prices to drop. A good example would be Warren Buffet, a renowned value investor, once declared that cryptocurrency will eventually become worthless, and Bitcoin prices fell after that. While price movements cannot be entirely attributed to negative publicity, there is no denying that public sentiment on cryptocurrencies can be effectively swayed in this manner.
