News and Market Sentiment’s Impact on Cryptocurrencies

The crypto market is highly volatile and assets’ prices change quite often, influenced by an array of factors (some are regular economic rules, while others are specific to the crypto sector).

The main factor that impacts crypto prices remains the supply and demand report, but other factors also have a say. For example, everyone knows that there are only 21 million Bitcoins ever to be minted, and the supply is slowly dropping, so it’s only natural for an asset like Bitcoin to grow in price.

But Bitcoin and other digital currencies also register value changes according to market sentiment and presence in news outlets. The crypto news today could cause price spikes for some cryptocurrencies and value drops for others. 

If you are a crypto investor and want to learn how market sentiment and industry news influence assets’ prices, this article might be helpful. Keep reading!

Discussing the impact of news on crypto prices

News and social media posts from prominent investors and personalities in the sector could shape market sentiment and, therefore, have a certain impact on crypto prices. News, especially those discussing a project’s adoption or a celebrity’s involvement in a project, could influence investor sentiment and directly impact assets’ prices.

For example, Bitcoin registered a massive price rise from November to December 2017 when the media positively covered the subject, encouraging investors to turn their attention to the digital currency.

Several mainstream financial outlets highlighted the numerous benefits of Bitcoin. Additionally, the discussions about Bitcoin and cryptocurrencies were positive on forums, so the asset witnessed growing retail investor participation. 

Significant positive news will bring the project discussed to the public’s attention, and investors will be more tempted to join the trend and trade out of fear of missing out. 

It’s essential to note that slumps usually follow bullish trends that sprang from positive news in crypto prices. The previous example of Bitcoin growing in value at the end of 2018 is a proof of this statement. The bubble burst at the start of the following year when negative commentaries from notable personalities reached the news and the financial communities started to trade more cautiously. 

It’s easy to see the influence of news media on crypto prices because the moment assets’ prices increase, skeptics tend to challenge their evolution, triggering value drops. A simple mention featuring a cryptocurrency on the front page of a well-known magazine can change the perception of the public. 

Discussing market sentiment

Sentiment is an essential tool when you analyze the crypto market because it helps you predict where prices are going, especially if you pair it with technical and fundamental analysis.

Everyone remembers the time when Elon Musk started discussing DOGE in 2019, and the market sentiment started to become optimistic around meme coins. His tweets caused Dogecoin’s price to grow 24.500% in only two years, driving the entire memecoins niche in a bull run. You can measure the market sentiment in multiple ways if you want to base your decisions on it and set entry and exit points.

From checking market indicators like the Fear and Greed Index to checking news articles and keeping an eye on social media conversations, all these tricks can help you gain leverage in the sector. 

The collective mood of the crypto community has a powerful role in deciding assets’ prices, hence it’s essential to understand the overall market sentiment. In the following lines we’ll discuss how to measure market sentiment through various methods. 

Social media analysis – as a trader, you’re already aware that you must check social media regularly to stay up to date with crypto upgrades. But you might not have been aware that you can use social media analysis as a tool to measure market sentiment and grasp a clear understanding of the overall community mood. You can check the frequency of a project’s mention, trending topics, and the sentiment of posts to figure out if the crypto community around a coin is bearish or bullish. And the great thing is you can use software to run social media analysis. 

News and media monitoring – The best place to find out the latest updates in the crypto world is the media, so you should have a look at the news stories and headlines discussing cryptocurrencies because they have a significant impact on market sentiment. As expected, positive news like institutional adoption and regulatory approval will drive positive sentiment, and on the other side, negative news about security breaches and issues with blockchains will have the opposite effect. 

Technical indicators – If you have experience in the trading sector, you know that technical indicators are used for chart analysis, but you can also use them to check the state of the market. You can check the Fear and Greed Index, for example, to gain insight into the level of volatility of the market, social media trends, and momentum. Seasoned investors usually purchase crypto projects when the market is fearful and start selling them when they enter the greedy phase. Additionally, you can check the 50-day and 200-day moving averages, and also offer complex information about the market sentiment. When the MA spikes above 200-day MA, the community is optimistic, and you can expect the prices to rise. 

What’s more to say?

The crypto landscape is in a continuous evolution, and so are the tools available for analyzing the market sentiment. The Market Sentiment Index is quite useful for traders who want to make predictions based on the trends in the sector.

The mix of market sentiment, news, and external factors will provide you with a complete tapestry of the direction where prices are headed. You’ll find it easier to navigate the crypto market if you are up to date with them.

However, it’s essential also to check the other factors that influence the evolution of crypto prices to make sure that you make the best trading decisions. And keep in mind that news often has a long-term effect on financial markets, so they contribute to the long-term trajectory of the sector.