How To Use Big News to Predict Bitcoin Price?

UTC by Jeff Fawkes · 15 min read
How To Use Big News to Predict Bitcoin Price?
Photo: Shutterstock

How to predict the Bitcoin price movement like a 80 lvl guru? You don’t have to buy an expensive course. In this piece, we will dig deep into the major causes of Bitcoin price rise and fall.

Basic secrets behind Bitcoin price are known, but those complex ones are buried. Some exchange indicators are free, some available for a boatload of money. Most market analysts are usually unaware of whale sell-offs and unexpected market conditions. While the self-proclaimed analysts dig in tiny details from controversial data parsers, the rapid spread of fiat inflation,  and stock bloodbaths, let’s take a look at the much easier to read a bigger picture.

Cases of Bitcoin Price Increase

Key developers announce major code improvements

Influence rate: Medium

When the key developers announce or release substantial improvements, price gains. All thanks to the new code. The project fans buy more and this results in a price increase. Partially, the cash starts flowing from the U.S. and Europe’s big investors. News bring in tech-savvy youth. Venture investors and hardware companies enroll in business models.

Investors are sure that other people will use the coin. Or, they already have some rare prediction or information about a big deal. Beware of the actors who play against the markets. Those are the most skillful, otherwise, they would fail.

Bitcoin gets many remarks on Twitter

Influence rate: Low

Per some eToro, researchers, Bitcoin rate coincides with the number of Twitter mentions. The more people name Bitcoin, the bigger the price and vice versa. This metric doesn’t have the full logic behind itself. However, it is worth trying out as an indicator. So far it was acting well.

Regulators approve cryptocurrency use

Influence rate: Medium

On July 17-19, 2017, India was shifting its focus from ban to taxation. This has caused one of the largest instant price increases in the early history of Bitcoin. On 28 October 2019, Bitcoin price gets a boost after Chinese President Xi Jingpin’s speech with a positive mention of blockchain technology. There were many such occasions.

Bitcoin’s security and scalability rises

Influence rate: High-Very High

Per the American Institute for Economic Research, major news about cryptocurrency scalability match with Bitcoin’s price movements. Signed by various scientists, the work outlines seven largest cases of such behavior. Per the study, the news on 20 July 2017 produced the hugest instant spike of the Bitcoin index ever (at the time of writing the work). Then, miners showed early support for the scalability improvement called SegWit.

Just three days after SegWit receives a preliminary agreement, the price gets another sharp 25% increase. SegWit is implemented, Lightning Network will be ready in several years, via the development efforts of Chaincode Labs and Blockstream. Also, SegWit opens support for Lightning Network. Other crypto software companies can create their Lightning nodes and experiment with SegWit.

Probably, the next big scalability or privacy news could give Bitcoin a significant price bump. In depends on the power behind the announcement.

Hardfork with new coins’ making

Influence rate: Low

This is not always a good scenario. Because after chain splits, the communities divide. However, back in August 2017, the currency receives a boost of almost 15%, right after Bitcoin split into Bitcoin and Bitcoin Cash.

The hidden hand of the market

Influence rate: Very High

Per some researchers, Bitcoin price rose to almost $19,000 back in 2017 because of a single bot pumping – the market was flooded by Tether. This study did lie the foundation for several lawsuits against Bitfinex.

‘Bitcoin guru’ Andreas Antonopoulos (who is famous for avoiding huge bribe offers) says that the allegations have substantial grounds. Per Antonopoulos, regarding how the Bitcoin economy works, the prosecution is moving in the right direction. More than that, Kyle Roche, an interim lead counsel, showed Antonopoulos his deep knowledge of ‘cryptocurrency, Bitcoin and blockchain’. Per his letter to the court:

“Kyle Roche, of Roche Cyrulnik Freedman (“RCF”), has demonstrated proficiency in these areas, unlike most other lawyers in the industry.”

Considering that Antonopoulos possess substantial knowledge on cryptocurrency, the path set for Bitfinex becomes more clear over time.

Cold news about stablecoins

Influence rate: Low

Each time news bashing Bitfinex and Tether hit the market, Bitcoin reacts in two ways. If the news negative for Bitfinex, the price of Bitcoin is rising: Tether related news causes investors to dump USDT, which triggers the crypto market to go green, thanks to the price peg breakage of USDT.

This means that the more negative news about Tether you see, the more investors are dumping their USDT. It makes the rest of the crypto market to gain sharply. All thanks to the balance laws of nature. Because, some exchanges allow valuing Bitcoin against Tether, not to actual USD.

The more some widespread asset (like the dollar) is depreciated the more other currencies worth. The same goes for dollar-backed stablecoins. The traders see the price per Bitcoin valuated in USDT. When price peg breaks, they see the delusional higher/lower price per BTC.

Also, they gain the possibility to sell a stablecoin at a higher price than usual, if stablecoins gain and cryptocurrencies fall. That’s up to 5% easy gain per one such episode.

Cases of Bitcoin Price Decrease

Government-backed takeover against crypto firms

Influence rate: Medium-High

China announced its crypto firms takeover back in January 2017. Police attended the offices in Beijing and Shanghai. Bitcoin’s price (which was at $775 by that moment) did fall by 14%. The investors were in fears that China will ban Bitcoin completely.

Later, during September 2017, Jamie Dimon was criticizing Bitcoin in the U.S. At the same time, China enrolled a final crypto takeover plan, which aimed to shut down all crypto exchanges. Bitcoin reacted immediately, with a 17% price decrease.

Centralization of the network

Influence rate: Very High

This is a very unrealistic scenario. Keep in mind that Bitcoin has nearly 7,000 to 9,500 public nodes. Plus more than 50,000 of the nodes hidden in Tor. In case the nodes will decrease in number, the network may start losing the price.

Also, the price falls when miners leave the network. In March 2020, the Bitcoin network lost 40% of all the miners. This has led to the network’s difficulty recalculation, making mining a bit easier to allow weak miners to rejoin. The price experienced a fall of 40% on March 13, mirroring the miner power decrease (before positive correction).

Key Developer leaves the project

Influence rate: Low

This is the first news in the history of Bitcoin that had a clear negative price impact.

When Mike Hearn was quitting Bitcoin in January 2016, he said that Bitcoin ‘will not scale’. He claimed that Bitcoin is revolving around China, Core developers are in some gang. And ‘Bitcoin failed’, so he sells all his stash. This caused a month of red candles.

The price lost approximately 16.5% during a month after his famous Medium post. But then, Bitcoin slowly returned to the price before the angry quit.

And the bear trend was gone, accumulating even more powerful bulls around Bitcoin. A fiery of rich trading cycles began.

Insane Whale trading against the market

Influence rate: Medium

A bright recent example of whale trading happened during February-March, 2020. The U.S. Senator Kelly Loeffler dumped a ton of stocks on the market. She has been the CEO of crypto derivatives exchange Bakkt for some time. Then, Kelly went to serve at the U.S. Senate at the end of 2019.

Kelly visited a closed meeting of Congress members on 24 January. The topic of discussion was coronavirus. On the same day when Senator Loeffler visited a secretive Congress meeting. Per the pubic disclosure, Kelly sold Exxon Mobil, Euronet Worldwide and other companies’ shares. At the end of March 2020, Kelly was accused of insider trading.

She did not disclose whether she sold any amounts of cryptocurrency. However, we presume that she had substantial personal crypto stash available.

As you can see, the whales never announce the true intentions. Cryptocurrencies lost a significant part of their price thanks to the classic stock market panic. The total number of U.S. based insider whales is unknown.

Coronavirus-alike contamination

Influence rate: High

On January 3, 2020, famous Bitcoin Guru Andreas Antonopoulos claimed during What Bitcoin Did Podcast that people will sell any kind of assets to cover their need for the masks. He said that food and other necessary things will become important.

He predicted the grand sell-off of cryptocurrency and the stocks:

“And the reason it will crash hard is that a lot of the venture capital, corporate investments and private investment from individuals that is based on cheap money and disposable income and excess cash in portfolios, etc., like in any other part of the economy, will dry up.

All of those things are a symptom of the fact that we have a small lifeboat and a very, very large number of people who need saving.”

Despite Andreas made a prediction 21 days before the closed Congress meeting, many of the holders didn’t pay much attention to his words months after that.

Many of the market participants continued claiming that cryptocurrency will go up to the halving event in May 2020. Per Tom Lee, it could make it to $40,000 without troubles. As per markets in March 2020, it seems like the holders are in fear of coronavirus in a much bigger scale than of anything else. Even despite the world economy mongers take extra measures to ensure stability.

Cases That Never Happen to Bitcoin Price

Many of the novice traders, as well as crypto-related enthusiasts, think that Bitcoin can perform magical stuff.

Bitcoin never gains permanent price – it will fall someday

Back in 2017, Bitcoin made a one-year rally from $1,700 per bitcoin at the years beginning to $17,500 at the year’s end. The lack of technical knowledge made people believe Bitcoin will moon after New Year.

The more bright rise cryptocurrency receives, the more epic it falls later. Bitcoin is no exception, falling sharply from $13,860 on 17 December (on some exchanges – $15,000-17,000 per BTC) to $6,900 on 17 March, 2018.

If you take any other coin, you can spot similar dynamics. If the coins keep falling for three, five or even seven days or weeks, be sure that it will bounce back. Such times fit well for short trading on local volatility.

All processes on Bitcoin markets obey cycles

If you see that the cycle is broken, then something went wrong. Like, if the network is not producing blocks in more than 2,5 hours, then it’s bad, as Bitcoin must process 1 block every 10 minutes. The same goes to the price, it must ‘bounce’.

Cycles are everywhere. For instance, look at the Decred PoS cryptocurrency’s market price for the whole period. You can see that Bearish and Bullish periods are going one after another. They even have close to similar time size.

Decred Price Cycles Bears Bulls

Source: Decred

Also, they appear to decrease in size as the trading balance establish. As if it was some cycle ruling everything, not the market demand and code improvements.

As the first cryptocurrency, Bitcoin was developing through wave-shaped price dynamics too. Before reaching the next price high, the price will likely reach the previous cycle’s peak, forming a Fibonacci curve.

Bitcoin price never mirrors public opinions

If you see that the majority of traders predict similar price increase, it may result in the opposite. The price will fall, and people following the unprofessional trader lose money. There are famous traders saying lies on purpose. Define who they are and avoid their forecasts.

If you see that somebody predicts Bitcoin at $100,000 in a year, think about their ability to predict the next Avatar movie storyline, which will see lights after 2021. It’s zero chance, the same goes for Bitcoin’s price in a year. Only trust the short and mid-term analysis.

Bitcoin Price Action in Details

Influence of retail traders

Influence rate: Low

Small traders do not cause large movements of the price. They can even unite into groups for organized pumping of coins. But such groups cause no effect without the support from a few whales. Any trend by retail investors could be easily disrupted in case a trouble occurs.

It’s simply because the influence of such groups is not big, as Bitcoin’s market is too substantial to strike it down with small sums. However, a ‘domino’ effect is still possible. One Whale sells a large chunk of coins. Thus, triggering other bearish whales to emotionally do the same. Then, the market goes wild.

Influence of OTC traders

Influence rate: Medium

Over-the-Counter trading has no obvious ways of measure. Crypto traders use various platforms and exchange phone numbers, and Telegram/Viber handles, or even the locations to meet in person. More trades also flow in end-to-end secret chats. The ‘official’ number is always smaller than the real state of things.

Such deals never get to any statistics. And the exact amount of the OTC market is unknown.

Some experts measure the volume per region, though, by counting the LB stats as the ‘OTC’ trading. If the OTC traders (both online and offline) engage in significant volumes, it will move the price per asset. Keep in mind that the OTC market may have its Bitcoin price significantly differ from the centralized exchange prices. Traders can take from 1% to 15% in fees – be extremely careful. You won’t be able to dispute the deal after you signed up for it.

Influence of exchanges, manipulators and artificial price pumps

Influence rate: High

Some of the cryptocurrency exchanges operate via third party bank accounts, use shady schemes, and commit bribery. Thanks to the soft regulation in certain economic zones, those exchanges can operate for years.

They transmit money and collect KYC, while the Internet is full of negative feedback from traders. Such exchanges can freeze transactions and steal untraceable currencies. People complain that Monero, Beam or Zcash is the usual target.

Exchanges also use trading bots to create artificial incoming volumes with their own money. This scheme described in full by The Tie, Librehash, and others. Per The Tie report, about 86% of all the cryptocurrency exchange trading activity might be wash trading.

The manipulation factor is one of the most significant among others in terms of Bitcoin price analysis. Also, the most unpredictable one. Usually, by the time an honest investigator finds out what’s going on, criminals get away with the money.

The influence of the market insiders

Influence rate: High

Market insiders are the closed circle of traders. Their influence over the market can reach an unbelievable level. Some of them enjoy fame, some of them not. Insiders are mostly the early miners and investors. They were working around Bitcoin to extract huge profits in the longterm. They were mostly producing content to bring Bitcoin to substantial hash power.

Be extremely aware of what large exchanges and firms do on the market. They could either disappear in a small European country like OneCoin creator Ruja Ignatova or imitate their death like QuadrigaCX former admin, Gerald Cotten, presumably did.

Influence of darknet markets

Influence rate: Low-Medium

The darknet traffic: people wash dirty money, buy illegal stuff, collecting a ton of coins. Cryptocurrency prices gain at least some part of their price from restricted activities. The anonymous nature of Bitcoin transactions and lack of technological knowledge among police officers (in many countries) are two key factors behind Bitcoin’s popularity in the criminal world.

Influence of Whales

Influence rate: High

The whales are the traders with deep pockets. When whales enter the market, they typically cause a sharp increase or decrease in price. Whales move large capital in a short series of transactions.

Sometimes, they use stablecoins for that purpose. Whales don’t divide their capital into pieces or diversify the portfolio. Other traders don’t like whales – they disrupt the natural price move. High-level whales prefer top currencies, not the ICO tokens and such.

Influence of Bulls and Bears

Influence rate: High

Bulls on the market mean uptrend is ongoing. Tim Draper is a Bitcoin bull, Roger Ver is a Bitcoin Cash bull, and Chandler Guo is an Ethereum Classic bull. All investors pick the coins according to personal preferences and the entry price.

Bullish/Bearish action can be of two types – coordinated manipulation and essential market demand. A classic example of the first case could be the COTI listing on Binance.

Influencers move the price of Bitcoin heavily. During the crashing of Mt.Gox exchange, QuadrigaCX, BTC-e/WEX, and the other ones: insiders knew what’s gonna happen. Also, the study claims that pumping groups are heavily buying ICO assets several hours before the listings and other events. Groups do so to dump the coins on incoming investors after the price receives a news-backed pump again.

Bitcoin price action repeated by other coins

Typically, the majority of altcoins are repeating Bitcoin’s price action, with slight differences. Those differences depend on the coin’s market cap, its popularity, recent news, developer announcements and so on.

Sometimes, large markets define the price movement by themselves. What you need to know about the altcoins, is that they do not influence the price of Bitcoin. It’s the Bitcoin price influences the price of altcoins.

Types of Trades: Shorts and Longs

A short position means that a trader is putting cash to withdraw soon. He does so when meaningful income appears. He can play against the market or try and make money on the primary trend. This type of traders usually the one ‘testing nerves’ of the market whales. If the price is falling, short trading brings profit to those who play against the market. If the price goes up, the ones who made a bet on the rise win.

A long position means that the trader bought an asset to hold it for weeks, months or even years. He doesn’t care about price fluctuations and risks. Long traders usually supply the most substantial support levels. If you see the news that another long support level is broken, things are bad. The price must fall substantially to make the longs unholster the guns and start selling.

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