There is a golden saying circulating on Wall Street and even in the entire financial circle: Buy The Rumor, Sell The News
This phrase can be translated as "buy the rumor, sell the fact", which is a common maxim in the financial market and is regarded as an iron rule of investment. It accurately describes the impact of market expectations and actual news events on market prices. To some extent, this is a universal rule, which also applies to the cryptocurrency world.
What exactly is Buy The Rumor, Sell The News?
This sentence mainly contains two meanings.
Buying on rumors is when a rumor or expectation begins to spread in the market and investors may trade based on it. For example, if the market expects a company to release an earnings report that exceeds expectations, investors are likely to buy the company's stock before the report is released because of this "high probability".
Selling the fact means that when rumors become facts, that is, when the official news is confirmed, the market reaction is the opposite of expectations. Using the above example, if the company's earnings report does exceed expectations, the stock price is likely to fall. This is because many investors will choose to "cash out" when rumors become facts, thereby making a profit, that is, "selling the fact."
This seemingly paradoxical phenomenon is actually caused by many factors. The phenomenon can be explained by many factors, the most important of which is the market's forward-looking nature. In other words, the market price feedback is not the final real result, but the expectations or rumors generated previously. But when this matter is really proven, there is no new news to drive the price to rise further, thus causing the price to fall.
The same is true in the field of cryptocurrency. Experienced traders and investors will not only trade based on news or data that have been verified and traced, but also pay attention to the expectations and predictions formed in advance. This is also what we often discuss as positive news. It can be seen that there is no smoke without fire.
Taking stock of the so-called big benefits in the cryptocurrency world over the years...
So, what are the typical positives in the field of cryptocurrency? How does the market trend during the whole process?
The positive impact of Coinbase’s listing has brought Bitcoin to its all-time high.
On December 8, 2020, Coinbase, the largest compliant digital currency trading platform in the United States, announced that it had submitted an S-1 listing application to the U.S. Securities and Exchange Commission (SEC). This cryptocurrency exchange, which was built by two young people, has grown into a new generation financial platform that can provide full-service services to 35 million users after 8 years. Therefore, once the news of its upcoming listing was released, it immediately caused a response in the cryptocurrency market.
Among them, Bitcoin has the biggest gain. As soon as the news came out, the price of Bitcoin exceeded $40,000 per coin, reaching a 10-year high. By January 2021, the market value of Bitcoin was as high as $695.5 billion, second only to the Internet giant Facebook, and even exceeded the market value of the Chinese Internet company Alibaba.
In fact, rumors about Coinbase have been circulating in the world for a long time. 2018 is an extremely important time node for Coinbase. Tiger Global Management led a total of US$300 million in Series E financing, which gave Coinbase a valuation of US$8 billion at the time. After that, rumors of Coinbase's listing spread. Interestingly, in more than two years after obtaining financing, Coinbase did not rush to go public, but chose to "let the bullets fly for a while" and started two major businesses: sector layout and acquisition and merger of startups. Many investors "buy the rumor", and the price of Bitcoin has officially entered a high-speed take-off stage, breaking through the previous historical high in one fell swoop, and the increase was as high as 300% in 3 months, which shows the confidence of investors in the future market.
On April 15, 2021, Coinbase officially landed on the Nasdaq, and the second shoe finally dropped. Although the opening price did rise as expected, reaching $381, and the initial market value was as high as $99.6 billion (the reference price given previously was $250 per share), "Sell The News" soon appeared, and the market turned downward. Bitcoin fell back to around $30,000 within a month. The good news did not create a higher price, but only gave speculators an opportunity to sell.
The news of the upcoming approval of ETFs has frequently emerged, causing turbulence in the crypto market.
In 2023, the US SEC lost again in the lawsuit against Grayscale. The case originated from October 2021, when Grayscale first applied to convert its closed-end Bitcoin Trust Fund GBTC into a Bitcoin spot ETF, but was rejected by the SEC. The judge ruled that the SEC's initial rejection of Grayscale's ETF application was "arbitrary and capricious", and that administrative agencies must treat administrative actions equally, and the logic of approving a Bitcoin futures ETF should be equal to the logic of approving a Bitcoin spot ETF.
In June last year, Blackrock, the world's largest asset management company, submitted an application for a Bitcoin ETF, which instantly ignited the enthusiasm of the crypto market and pushed the price of Bitcoin from $25,000 to $30,000. After BlackRock, asset management companies such as WisdomTree, Invesco, and Fidelity also submitted applications for Bitcoin spot ETFs.
At the beginning of 2024, speculation about whether ETFs can be officially approved swept the entire network, and such predictions have been made one after another. Global mainstream media, including Bloomberg and The Wall Street Journal, have recently frequently reported negative information about ETFs, and many investors will regard this as a positive. Because major institutions have frequently contacted the SEC, it can be seen as a sign of further promotion of ETFs. There are also ETF issuers interacting with traders, and there are even reports that a certain institution's ETF has passed the exchange review and is awaiting final approval from the SEC.
Of course, there are opposing voices, and some believe that the ETF has a low probability of passing. Unlike blindly positive or negative news that will make the market appear one-sided, there are frequent alternations of positive and negative news on whether the ETF can pass, and one-sided or excessive interpretations are everywhere, which undoubtedly makes the market sentiment more tense.
In the early morning of January 11, the US SEC approved 11 spot Bitcoin ETFs at one time. However, the price of Bitcoin also began to fall and the 40,000 mark was shaky. The main reason was that Grayscale's Bitcoin Trust (GBTC) faced huge capital outflows against the backdrop of the sluggish cryptocurrency market. The disappearance of GBTC's previous 40% discount caused many investors to withdraw, forcing GBTC to sell BTC to meet redemption requirements. This process is expected to take several weeks and is affecting Bitcoin's short-term trend.
In 2024, what other positive factors are worth paying attention to?
The golden rules of investment will not change, and in 2024, “buy the rumor, sell the news” will inevitably occur frequently.
ETH Cancun Upgrade
As we all know, the purpose of the Cancun upgrade is to reduce the gas fee of layer 2. The cost of chaining is greatly reduced, which is beneficial to the entire ETH ecosystem. The market of the Cancun upgrade is also likely to be hyped in advance.
Bitcoin Halving
Almost every bull market in the history of the cryptocurrency world is accompanied by the halving of Bitcoin. In April-May 2024, the Bitcoin halving is inevitable. After the halving, each block will only be rewarded 3.125 BTC, and this number will be halved again in 2028 and beyond. In the Bitcoin network, halving occurs approximately every four years, which means that the number of newly minted BTC will decrease, making Bitcoin more scarce, thereby pushing up its value. Looking back at each halving that occurred in 2012, 2016, and 2020, they all had a profound impact on the price of Bitcoin.
Fed cuts rates
The Federal Reserve has recently loosened its tone, and it is very likely that it is releasing the tone of interest rate cuts. Once this happens, it means that capital liquidity will be released and the cost of using funds will be greatly reduced. For the cryptocurrency field, this will be an important positive, because it means that the investment and purchasing power of the cryptocurrency circle will become stronger.
US election
The US presidential election will be held in November 2024. Generally speaking, the intensity of regulation will be greatly reduced after the election, and the market will tend to be calm. The crypto market is likely to usher in a critical period of peaceful development, which is also a positive factor worth looking forward to.
Negative and positive news in the market are indeed a good opportunity for many speculators, who can use these news to dump the market or push up the market, and finally make a profit. However, for investors with low industry awareness, they should be good at summarizing, analyzing and judging which news will have what kind of impact on the market. Do not FOMO and cause unnecessary losses!
