Study on price reactions to Bitcoin-News

Crypto currencies like the Bitcoin became prominent because of their extreme exchange rate fluctuations, but also aroused distrust on the part of the regulators. In a study, the Swiss Bank for International Settlements (BIS) has now examined the effects of Kryptonews on the price development of crypto currencies.

In its empirical study, the BIS examined the price reactions to a total of 151 messages from the cryptographic sector. She makes her approach clear using the example of two messages that noticed the cryptographic market at the time. The first is the SEC rejection of a Bitcoin ETF in March 2017. The second example is the decision of the Japanese financial supervisory authority FSA, which became known in June, to demand increased measures against money laundering from six crypto exchanges.

Thus, within the first five minutes after the SEC decision became known, Bitcoin’s share price slumped by 16 percent. The FSA report also caused the Bitcoin share price to crash in June.

Good news, bad news

The BIS concludes that positive news carries an average Bitcoin price increase of 0.33 percent; this applies to a time window of 120 minutes, 60 minutes before and 60 minutes after a headline is published. If this window is extended to 24 hours, the gains become more substantial. Here it is 1.52 percent by which the BTC price increases on average.

Negative news is reflected – at least in the 24-hour view – in clearer price movements. Although the price losses for the 120-minute time window around a negative report are at the same level as the increases for “good news” at 0.32 percent, the 24-hour window shows average price losses of 3.12 percent.

Bitcoin is a security

The fact that price movements can already be detected before a report becomes public suggests that news and information flows are gradually spreading.

When it comes to Bitcoin’s legal status reports, the BIS distinguishes between four subordinate topics:

specific set of rules for Bitcoin (outside its consideration as a security)
While reports on points 1-3 have a negative impact on the price both in the course of the day and in a 10-day comparison, news on specific regulatory guidelines (which do not regard the Bitcoin as a more strictly regulated security) have resulted in price increases for the Bitcoin.

For the Altcoins, the analysis comes to comparable results – especially for the “Bitcoin clones” Bitcoin Cash and Litecoin. Ethereum also reacts to news with similar intensity as Bitcoin. The privacy coin Monero is also susceptible to message-related price fluctuations, while competitor Zcash is less influenced by the current news situation. The XRP token, which is a special case due to its centralized structure, runs out of competition.