Crypto Contrarian: Why Trading Bitcoin Based on Media Bias Is a Bad Idea

In 2017, a perfect storm created Bitcoin’s meteoric rise to $20,000. The cryptocurrency went from relatively unknown, confined to the dark web and other corners of the internet the general public and institutional investors don’t pay close attention to.

Right under their noses, the asset had grown over a decade from $0.0008 to an all-time high of just under $20,000. No other asset in history has provided anywhere nearly as significant an ROI.

As mainstream media, Main Street, and even Wall Street learned of the life-changing wealth the new, futuristic digital currency generated, FOMO caused a frenzy of feverish retail buying of Bitcoin and other cryptocurrencies at any price.

Bitcoin’s Ripple Effect That Continues In Mainstream Media, Even Today

With Bitcoin seen as expensive at almost $20,000 per BTC, everyday Joes, grandmothers, and Gen Z teens began buying up altcoins hoping to strike it rich with the next Bitcoin.

Less than two weeks after Bitcoin peaked in December 2017, at the turn of the year, another well-known cryptocurrency was taking off. The cryptocurrency is XRP, commonly referred to as Ripple. Like Bitcoin, the asset became famous overnight. A Ripple forecast made headlines at CNBC, informing eager investors on How to buy XRP, “one of the hottest bitcoin competitors.”.

Ripple peaked and crashed days later, eventually reaching a 95% drawdown almost 700 days after the article ran. The article has since gone on in cryptocurrency history to become a long-running joke.

The article ironically includes a child underwater surrounded by coins. Any investors who listened to CNBC and bought XRP on that fateful day, is still underwater on their investment today.

It also started a recurring theme for CNBC essentially calling tops and bottoms in Bitcoin, based on their headlines and even their Tweets.

Predicting Bitcoin: Price Moves Opposite Most Recent Headlines

Which direction Bitcoin would head next almost always contradicted the headlines appearing on CNBC. If headlines were bullish, calling for new all-time highs, then Bitcoin would crash in the days ahead. If headlines were bearish, calling attention to a selloff or other negative note, Bitcoin price would pump into the positive.

Each time the sentiment in headlines shifted, so did the short term trend in Bitcoin.

While CNBC is used as the example here, this same theme runs rampant throughout mainstream media and beyond. No media outlet is being finger pointed as a guilty party – this is contrarian market sentiment 101.

Many of the headlines listed in the chart above representing CNBC headlines, were also direct quotes from fund managers and institutional investors. These respected experts in finance, also got it terribly wrong.

Evidence Proves Trading Bitcoin Based on Media Is a Bad Idea

This evidence shows that listening to mainstream media on what Bitcoin might do next, is a very bad idea. Either media, smart money, and other big wealth investors also regularly make mistakes in their calls, or their comments are attempts to bait the herd into chasing trends and playing on retail investor’s peak exuberance.

This also means that although they are making such statements, quietly, they are doing the opposite of their own recommendations. The same happened in the dot com era, where big name institutions claimed buying internet stocks was dangerous and a fad. Today, those same institutions own the lion’s share of Facebook, Amazon, Google, and other major internet brands. They were bought out from under early retail investors at low prices, thanks to spreading fear, uncertainty, and doubt through the media.

Some of the greatest investors and traders in the world advocate taking a contrarian strategy to avoid getting caught up in an emotional response to what you read in the media. Even Warren Buffett was quoted as saying, “Be fearful when others are greedy, be greedy when others are fearful.”

The message perfectly conveys a strategy that would suggest traders take positions opposite what they read in mainstream media or when hedge fund managers make bold calls for all-time highs.

Taking Advantage Of Contrarian Cryptocurrency Trading With PrimeXBT

If sentiment is overly bullish, then it may be time to short Bitcoin. When things look especially bleak, and the media seems to be kicking Bitcoin when it is down, that’s the time to go long.

Taking such positions to profit from contrarian market sentiment is a strategy that’s possible using PrimeXBT, an award-winning Bitcoin-based trading platform.

In case CNBC or one of the many media outlets reporting on crypto market movements gets a call right, PrimeXBT offers tools for risk management such as stop loss and take profit protection orders.

Register for PrimeXBT today to prepare in advance, and consider experimenting with adding contrarian cryptocurrency trading strategies to your repertoire. You may be surprised by how successful doing the opposite of the herd can be.

 

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