There is a famous investing adage: “buy the rumor, sell the news.” If you observe crypto markets for a certain amount of time, this advice has been proven true more times than not.
Markets are typically driven by emotion and because of this when a rumour with expected positive sentiment comes out, it generally means the price is going to increase leading up to the actual news release.
Probability shows that more often than not this pump spikes when news is released and then a subsequent correction occurs.
And don’t think this is just a cryptomarket phenomenon, it’s a market phenomenon. For example, Apple’s share price increased leading up to the PC for it’s new Iphone. After the PC the stock dipped likely because traders were realizing profit at the top of that particular pump.
In Zilliqa communities, the whole month of January has been hyped with news about imminent mainnet launch. Deploying a mainnet is a big event for any crytpo coin and ZIL took the anticipation levels to another planet.
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The price followed the hype – the rise in the value of Tron is attributable to the rising interests from investors towards the mainnet launch of the Tron network. The Tron mainnet is expected to launch on May 31.
More experienced traders are already used to the known scheme in cryptocurrency sector: there is almost always a price dump that occurs immediately after the big event, such as the mainnet launch, as investors in the cryptocurrency market tend to buy the rumor, news, partnership, and product launch, and dump the cryptocurrency quickly thereafter, as soon as a partnership or a product launch is finalized.
The news and hype around the mainnet launches lift up the price, they attract bigger whales who already know the drill of event-driven pumps and dumps which leaves more inexperienced traders stuck with bags of expensively bought coins.
Something similar just happened to Ziliqa – it peaked on January 27th with market cap of 194 million USD and price of $0.023 and it was a downhill from there, to the current cap of $140 mil and $0.017 per coin.
Holding through the news is usually just greed trying to get more, and 9 times out of 10 the news isn’t all it’s been hyped up to be so he price goes down. That is unless you aren’t planing to hold ZIL for the next few years then you shouldn’t even paying any attention to the regular bull and bear runs anyways.
How to Play Rumors and News
Thus one could say the best moves would have been:
- Buy positive events that occur without rumor.
- Buy positive rumors.
- Sell negative rumors.
- Sell before or shortly after any event that positive rumors have been building up to.
- Sometimes it can make sense to buy before any event that negative rumors have been building up to.
- If an event doesn’t occur on time, the price will almost certainly drop, so consider having stops set.
- Always consider that this is all a matter of probability, nothing HAS to happen the way one expects.
