Arguably, the adoption of Bitcoin — by the mainstream public — has been the biggest driving force behind the recent rising of various Altcoins. Pre 2016, most of the general population wrote off Bitcoin as internet money for criminals — and the forgotten Silk Road scandal still tarnishes Bitcoin’s name until today. Coins such as Ripple (XRP), Tron (TRX), Litecoin (LTC) and many other Altcoins, 1,525 to be exact, have since emerged into the public eye. Bitcoin was the first to offer the blockchain technology and we have come a long way since then. With so many promises from a myriad of Altcoins it is hard to know which token technology will back it’s word.
Cryptocurrencies are given value based on a certain criteria; the utility and purpose plays a big role in token worth. More factors such as volume, volatility, infrastructure and demand also factor into this. Just like any investment worth putting your hard earned money into, constant progress and updates keep you in-the-loop and informed with how your money is helping develop this asset. Poorly written white papers and updates that are few and far between do not inspire confidence when choosing a coin.
Every coin with the hopes of being viewed as legitimate, has a white paper that is easily accessible and gives a summary of the technology they offer. Most coins offer services to fill gaps in niche markets, others want to pioneer the adoption of blockchain for their industry, and some were just created for the sole purpose of being used as currency. At the time that this is written there are currently 1,528 coins available on 8,697 markets worldwide. With so many cryptocurrencies present how is one able to differentiate the useful from the wasteful?
The biggest factor that can make or break a coin is media exposure in any facet. Outlets such as social media, news articles, big name journals, YouTube channels, to name a few, are big public influencers. Anytime the mainstream media touches upon a topic, you can rest assured people will be talking about it. With ease of accessibility to cryptocurrencies and reports of overnight millionaires, the masses begin to take notice and eventually want a slice of the pie for themselves.
Being that cryptocurrencies rise and fall at the hands of the media, I have experienced my fair share of news driven volatility.
Among other coins, my first big investment was in a cryptocurrency known as Ripple. I was quite an inexperienced trader at the time and most of the reason for my purchase was the excitement of getting into the market. Prior to my purchase I had little chart analysis experience and did not understand much of what was going on. I ended up buying $250 worth of ripple at $0.14 per token. Understanding basic economics, I would buy as low as I could get and sell as high as people were willing to pay. With a volatility of a few cents per day this would net me a whopping $3–5 per trade. Which equated to roughly $20 a day.
Up to that point, Ripple was still in its infancy and had not hit the media platforms yet. Continuing this pattern of trading small volume at penny gains exhausted me, I soon stopped selling and just held on to what I had in hopes of continuing later. Little did I realize what the media was going to do to ripple. As news of American Express partnership hit news outlets everywhere ripple began to grow, and not the 2–3 cent daily rise and fall. It made substantial gains and continued growth for as long as people were talking about it. This $0.14 coin was nearly 80 cents by this point. After realizing the correlation between world news and token price, I soon became addicted.
Scouring every media source for the next coin to get exposure, I would stumble upon John MacAfee. This man’s word was law to crypto traders at the time and his infamous “coin of the day” was the type of exposure in a token I was looking for. Following his word, I would watch coins that he endorsed and sure enough they would climb in price only to face a severe decline in price shortly after, when he would sell off the coin he just endorsed. Over and over he would do this and eventually we came to term this as a “pump and dump”. Though I had never bought into his hype and came to realize what he was doing, I had become less willing to throw my money at any coin that was shown in the media. I soon changed my criteria from mass hype to credible news.
The Crypto Proponent — John McAfee John McAfee/Twitter
As cryptocurrency is exchanged on so many markets worldwide, different countries reacted differently to this newly adopted means of investment. When legislation came out banning or limiting the trading of cryptocurrencies, price would dip, and many players would leave the field. It would astound me how a ban in china would make such a big difference in how my portfolio did. As traders got around these bans and the market cap picked back up I would notice larger asset gains. Even subtle events such as morning time in different regions of the world would spike my portfolio as those traders woke and began their trading for the day.
The most considerable change to my portfolio came from a resource I used daily, Coinmarketcap.com (CMC). It is a great resource for checking how a coin is doing and which markets it is being traded on. Being that I held a bunch of ripple, I would check how ripple was doing daily. Varying markets traded the coin at different rates that usually differed by a couple pennies and the average would be taken to set the price presented on CMC. This held true until the Korean exchanges began trading ripple at a premium due to their stringent regulations. When converted over to USD from KRW, ripple was trading at a premium of over $1 compared to other markets worldwide. Soon the CMC price would show unrealistic values as it was driven up by the Korean average. The skewed CMC ripple value showed a large jump in ripple price and that caused the masses to buy, buy, buy.
Ripple (XRP)/Coin Market Cap
Like a self-sustaining cycle, the increase in price brought more buyers, increasing demand and thus raising the price. This continued as ripple hit the $3 mark and even surpassed it. Now the big news to change everything was when CMC decided to stop including the KRW exchange price of ripple without notice to consumers. This reflected a price drop of a considerable amount, when in all actuality the price didn’t change at all and was now more accurate. The CMC value changing this suddenly and without warning caused a mass hysteria that lead people to sell off what they had to avoid a loss. This took me for a wild ride as my portfolio went from $0.14 a share up to $0.80 up to $3+ and down to $1.78. With a couple thousand ripple you can see how events like this can really affect you.
World news will continue to come out and change the outcome of cryptocurrency markets daily. Being vigilant and aware of situations happening all over the world is a key in trading cryptocurrency. The market never sleeps and runs all day and night, 365 days a year. Prepare for the good and the bad and always be on top of the news. This is a small example of how laws and actions of people across the world affected my investments without ever being in contact. News can change trader psychology in direct and indirect ways, and the market is run on trader sentiment.
The takeaway from this is that people dictate how well a coin will do, not one person but the culminated mass of exchanging that coin will drive the price up or down. When the masses hear news, they can take it as good and more will buy in, driving the price up. Or if the news is deemed bad or irrelevant, many will get out dropping the price and causing even more people to sell off in fear of a large correction.
Best Wishes in your trading,
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