Cripto247: What news drives the price of bitcoin and other cryptocurrencies?

Bitcoin In The News – Don’t Believe The Hype, But Don’t Believe The Naysayers – Opinion

Opinion | October 13, 2018 By:

There are those who call it “The Great Crypto Recession of 2018.” But to rewrite the history books, you have to review what happened in the short life since the best known cryptocurrency began.

Recently, new (annual) minimums were registered in the cryptocurrency indexes. According to MVIS CryptoCompare Digital Assets, since January the market collapsed by 80%.

That drop is compared to the fall after the .com bubble. In 2000, the Nasdaq Composite Index fell by 78%. Many of the investors who bought bitcoin and other cryptocurrencies during the 2017 boom are seeing big losses, like their predecessors at the stage of cheap Internet stocks almost 20 years ago.

“Millionaires overnight”:

Last year, as the price went up, the phrase summarized the perception of the crypto ecosystem. In the second semester, every week that passed, bitcoin was worth more. For the world of traditional finance, which is aware of prices and news of assets in general, it was a hobby. The lack of regulation, and some barriers of technological entry, implied some distrust of the crypto industry in general. But even those who did not know anything about the subject experienced a certain FOMO, fear of missing out, and wanted to know what the new gold was about magical internet.

History, although it is recent, also is worth:

However, since bitcoin emerged in 2009, just after the crisis that destabilized the world economy, its price has not lacked volatility. In fact, only in the last five years have two major corrections mimicked that of the Nasdaq in 2000. As noted by Forbes partner Joseph Young, in 2013 the price fell by 83%, and again by 87% during 2014-2015.

And the future?

Meanwhile, the volatility of its price is not a good indicator of its future as it persists in the ups and downs. In fact, if you take into account the past, bitcoin had an inter-annual growth of almost 53% (from $ 4,100 to almost $ 6,300). What really shows growth is the adoption and actual use, as technology improves, and as in all areas of the economy: confidence increases.

According to the Bank for International Settlements, favorable events generate an average return of 0.33% in about 120 minutes of knowing the news

Prices, transaction volumes and cryptocurrency customer bases around the world react strongly to news about interventions by national authorities, according to the Bank for International Settlements (BIS). In a monograph of his September report, published yesterday, Raphael Auer and Stijn Claessens analyze the regulation of cryptocurrencies and their market reactions.

The news about interventions that affect the legal nature of cryptocurrencies, from complete prohibitions to declarations advocating their subjection to securities legislation, are those that have a greater negative effect on their prices. “This negative effect is great and persists over time,” according to the article.

News related to guidelines for the treatment of cryptocurrencies under the rules on the prevention of money laundering and the financing of terrorism have also had a significant and lasting effect on prices, although less pronounced.

For example, the decision of the Securities and Exchange Commission of the United States (SEC) in March 2017 to reject a proposal to modify the regulation of stock exchanges and to allow the creation of a quoted fund for bitcoin made after about five minutes its price fell by 16%.

Favorable events generate an average return of 0.33% in about 120 minutes of knowing the news and 1.52% in about 24 hours. The unfavorable events cause a fall in profitability of 0.32 and 3.12% in those same time periods.

In contrast, general warnings about cryptocurrencies, such as the risk of losses, have had a barely perceptible effect on prices.

This article was originally published in Spanish at Cripto247.com