Always be aware of news flow when trading cryptocurrencies.
Once its fully disseminated, we can often see a “death of news” reaction, which can lead to selling pressure.
“Periods of good news are followed by periods of unusually high returns relative to natural benchmarks, with the reverse for bad news… Post-event drift is the tendency of individual stocks’ performances following major corporate news events to persist for long periods in the same direction as the return over a short window—usually one to three days—encompassing the news announcement itself.” —Andrew Jackson and Timothy Johnson, Unifying Under-reaction Anomalies
The Dogecoin (DOGE) Example
For example, Dogecoin (DOGE) jumped 60% the other day on an announcement of integration into the Ethereum network. While investors drove the coin higher, the move became unsustainable. The information was out. The momentum began to die off.
As a result, the coin has since slipped from recent highs.
IOTA (MIOTA) Slipped, too
MIOTA had jumped as much as 40% following its integration into Fujitsu as their new standard protocol. The IOTA-integration would allow Fujitsu to handle data storing in production and to engage with the automotive and manufacturing industry.
However, once the information was priced in, momentum began to shift.
Shortly after, MIOTA would erase a majority of its wins.
Technical Indicators can Pinpoint Reversals
Many times, technical indicators can pinpoint reversals, too.
In fact, after major events DOGE typically tops out at its upper Bollinger Band (2,20). It also begins to become overbought and pivot on over-extensions on RSI and Fast Stochastics.
The death of news factor is just something to be aware of when trading.
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