How to Analyze News

If you can predict when a security is likely to go up or down, you can make money. This works fastest when the price is volatile. Cryptocurrencies are very volatile.

A simple but effective strategy is to buy on good news, and sell on bad. A simpler approach is to sell on bad, "sell on the rumor". When Mt.Gox was liquidated Bitcoin dropped. Bad new drives the price down.

Prices are most strongly influenced by supply, demand and emotions. Bitcoin's supply is generally predictable, so usually the most important factors are demand and emotions. But news such as whales have a double effect. When a whale like Mt. Gox sells, it increases supply, which decreases price. Plus news of the very large sale creates negative emotion, which pushes prices down further. The bankruptcy trustee has gotten prices far below average since he started selling.

News is strongest when it's fresh. A few days or weeks later people forget. If there's no more serious bad news, prices are likely to recover. And when Mt. Gox's Bitcoin is all sold, this downward pressure stops completely. This means prices should move up even more.

The question is timing. In this case, buy after the whale has depressed prices, and sell after Mt. Gox has sold their Bitcoin. Even if you don't catch a whale, there are always plenty of other opportunities.

There are always multiple factors. Think about which are stronger and balance them.

News often isn't. Financial media tries explain what happened, even when they have no idea why. Use your own judgement. And watch the news.