The market trend of cryptocurrencies follows the laws of the financial markets closely. Both react according to the market’s supply-and-demand relationship and the macro and micro environmental influences, with each individual crypto-asset similar to a stock in the traditional financial markets. They each have their respective characteristics and supporting value propositions. Therefore, investors can form a more accurate forecast of market conditions by assessing market trends, news, fundamental and technical analysis based on available data. This article will briefly explain the basic concept, characteristics, and use of News Analysis for investors.
What is News Analysis
News Analysis is a method of obtaining information on investment trends and investment approaches through a comprehensive analysis of all asset-related news, including products, project milestones, and personnel changes in the project team. In the most straightforward terms, news analysis is a way for investors to find out what is going on and then develop an investment strategy based on the facts of what has happened.
In addition, as most of the time, the market does not provide timely feedback on internal project conflicts and macroeconomic changes, news analysis allows investors to benefit from the timely assessment of breaking news to anticipate the market’s reaction on a more macro level.
Pros and cons of news analysis
Pros: News is an important factor in triggering short-term volatility, and when significant news is obtained, investors can often reap higher returns than just technical and fundamental analysis strategies by developing a short or long strategy based on the news.
Cons: Project owners, giant whales and vested interests can use inaccurate or incomplete news to mislead investors, making it difficult for novice investors to respond properly when they are unable to confirm the accuracy and completeness of the news.
| Macro markets | Micro Markets |
| 1. Global economic trends 2. Policy news 3. Opinion leaders’ comments 4. Major unexpected events 5. Technological breakthroughs 6. Innovative concepts | 1. Project team changes 2. Investment status 3. Internal project news 4. Project emergencies 5. Institutional private placement 6. Whether the project has been listed on MEXC and other exchanges |
Note: Besides following up on the project’s tweets and telegram updates to capture first-hand information about the project, trading platform information channels such as MEXC, MEXC Research etc. can also provide useful market feedback on projects.
Examples of News Analysis
- Policy news: The global restrictions on Bitcoin mining energy consumption in 2021 led to downward market sentiment in mid-2021, which then triggered blockchain congestion and market panic. After crypto miners found new landing spots around the world, the price slowly recovered and broke previous record high prices in months.
- Innovative concept news: Facebook’s name change exploded the “meta-universe” concept and token prices in the GameFi and Play-to-Earn space climbed across the board.
- Technology breakthrough: The implementation of the Ethereum fork and its sharding plan saw the price of ETH rise by over 300% in the year from early 2021 to early 2022.
- Global economic news: The Fed’s plan to raise interest rates has led the market to expect less money to be invested in the crypto market as a result, which in turn has led to panic in the market, creating a downtrend in early January 2022.
- Project-side movement news: The departure of project-side development teams, founders, and principals can affect market investors’ sentiment about invested projects, leading to a downward trend in coin prices.
- Opinion leader comments: Musk’s repeated comments on Dogecoin have led to back-to-back spikes in 2021.
It is important to note that news analysis must be integrated and comprehensive with the greater macro environment. Individual news does not quickly advance the overall market sentiment to the upside or panic, and broad news coverage is key to news analysis.
Closing thoughts
News analysis requires a broad knowledge base and a keen sense of the market and macroeconomics. By identifying the source and the accuracy of the news, experienced analysts are able to accurately predict future market trends that are not available through conventional market analysis. Only by constantly verifying news and market feedback can novice investors form accurate news analysis capabilities.
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