We are experiencing wild times in digital currency prices. It seems like any news or event, whether made up or legitimate, will drastically drive up the price of Bitcoin or an Altcoin. A question I have been asking myself is how to tell when news is truly beneficial to the value of a digital currency? I don’t think there is a definite answer I can give, but after two years of watching news and prices closely I believe I can officially say…
- It is relatively easy to make a judgment call on a crypto event.
- The right decision when the news is not incredible is almost always to sell.
Let me define an inconsequential piece of news or irrelevant event I am referring to first. These consist of information that should not affect the price of a coin in any way, but cause it to skyrocket nonetheless. I think of unimportant Crypto News as information leading to a short term quick burst, such as a coin already available on other exchanges being listed on a new exchange. An event driving up the price of a crypto currency can take many days. For example, we have repeatedly witnessed the prices of coins rising leading up to a conference, and quickly fall back again, typically on day one of the event. The ultimate example of an event driving the price is when a pump and dump group decides to jump on a coin. You have to be quick to determine the cause of the increase and sell high when this happens.
Here is an example of an event briefly driving up the price of a currency when there is no real value being added. On January 3rd, 2018 a very wealthy buyer started purchasing Nexus. Four days later they had purchased five million NXS driving the price from 20k sats to 90k sats, but had the buyer really increased the value of Nexus? No news or wallet upgrade had been released. The project was the same after he bought as before, so only the short term demand he created drove up the price. When he stopped buying, the price eased back down. Had you been holding Nexus when he started, it would have made sense to sell when you saw his huge buy orders disappear.
You would have needed a few things to take advantage of this situation. First, you would have needed to own NXS before the price exploded. I never would personally buy something that has already pumped, so there is a factor of luck. Eventually a digital currency you own will have a similar situation, you just need to know what you are going to do when it happens.
Since you need to own the currency already, you need to have a way to monitor the prices of the coins you own in case they go crazy. There are many tools available to update you. I have put together a page to help you create your own personal refreshable coin list which can be accessed from any device if you need something. Here is the link…
What To Watch Out For…
When the entire market is up 20%, your coin is not meeting the criteria I am talking about just because it is up 25%. When there is legitimate news, such as a new release announcement, or a partnership with a major company, these are not insignificant events.
When the price of one of your coins unexpectedly shoots up, you need to first find out why. Bitcointalk is a good place to start. Many projects will update there first. Usually you can just take a look at the last page in the thread to see what has recently been updated. Another good place to look is the project’s Slack or Discord channel. Be sure to have them at your disposal if you have invested in a coin.
Once you find out the reason, you need to make a determination if the news or event is enough to significantly drive the price to permanent new levels. Is the project really going to be worth more? There are too many scenarios to outline here, but really big news should be obvious. If it is not really big news, the majority of the time it makes sense to sell on the pump, and buy again in a couple weeks when the price falls back to the new normal level. This will sometimes backfire, but if you are up over 50% on the fake news pump, more often than not you will be happy with your decision a few weeks down the line.
I had my friend send me this example from a sale he had in the month of January. He noticed the price of PIVX had increased from around 80k where it had been hanging out for a few weeks to over 100k in less than 10 minutes thanks to his notifications. He immediately jumped into the PIVX Discord channel and saw the announcement stating PIVX had just been added to the Binance exchange.
If PIVX had only been on a minor exchange such as Coin Exchange at the time, being added to Binance would have been a pretty big deal, however, PIVX was already on another major exchange, Bittrex. Being added to Binance was not a game changer for the project.
After determining he was going to sell on the unimportant news, my friend continued to watch the price sky rocket until it seemed to stumble once it reached 140k sats. As the price quickly fell, he sold at 130k. Fifteen minutes later, the price had fallen back below 120k… he had gotten out just in time. As the days went on the price continued to dip.
Eventually, eight days later, my friend bought back in near the price PIVX had been before the pump. This will not always be the case. Sometimes a coin will level off at a higher low, but unless there is more news, the price should find a new low somewhere. I personally always wait to see if it will reach the price it took off from before considering buying back in.
Here are the Sells and Buys from his trade. It was an amazing trade timed almost perfectly. The only thing I would have recommended to him would be to have done some Technical Analysis before rebuying. The strongest support for PIVX was closer to 72k sats, and he may have been able to buy back at an even lower price if he had watched and waited.
He says he is happy with the trade and I should shove my recommendation somewhere dark and unpleasant.
(Author’s Note: PIVX dropped down below 72k sats the next day.)
In the end, he owned the same number of PIVX he started with, and a few more BTC. Calculating his profits for eight days on the PIVX trade…
This same situation pops up again and again in the crypto world. Will you be ready to take advantage of it next time? Selling is often harder than buying, especially with a coin you are emotionally attached to. I would recommend watching this scenario play out a few times before trying it yourself.
I wish you luck!
Appreciation is always appreciated…
Bitcoin address: 1EPyFDbRtfxMvpAhCyXBH2xwMuJ77Wwb41
ETH address: 0x2F4203691f48a95D96A261f3453f39fdf490c386