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Filtering Fake News in the Cryptocurrency Market

dealing with crypto fake news

If you are familiar with cryptocurrencies for more than a few weeks, you’ve probably already read a lot of articles online that are misleading. Unfortunately, a lot of the online content is very subjective, for various reasons, and that leads us to processing information that most of the time is false. There are a few things that must be taken into account, though, in order to not fall into the traps most of the beginners do.

Resisting the hype

It should be a lesson already that in case something is “too good to be true” then that’s very likely the case. Now don’t get us wrong, there are a lot of major developments that can occur. The problem is the emotional response people feel and that’s what clouds our judgment when we must make an investment or trading decision. Crypto appetite is influenced by a lot of different factors, but in the crypto sphere, we’ve witnessed many big market moves that were built on false news.

As always, the result had been the typical “pump-and-dump” or short-squeeze schemes. Managing to perform well in such a challenging environment will be a real task to get done and one way to do it has to do with our next piece of advice.

Documenting all new developments

Although some news might look overwhelming, make sure you are documenting enough to be sure the truth is not hidden. Read industry-related websites, follow official pages managed by companies currently holding crypto projects, and lastly, make sure the information makes sense based on a cause-effect relationship.

Reading a single crypto-related article won’t make you an expert, which is why it’s important to develop a habit of constantly looking for information and questioning everything you read online.

Finding trading opportunities

As strange as it may sound to some of you, fake news can generate huge trading opportunities. All pump-and-dump schemes eventually end up crashing down and that’s when traders can enter the picture. Market valuations are distorted and at some point in time, a “reversion to the mean” is bound to take place.

The market can’t simply move is a single direction based on lies. Even if the underlying fundamentals had improved/deteriorated, price does not move in a straight line. It’s true that sometimes the market can overshoot, but if you have some technical analysis skills, you will manage to understand, based on the price performance, when a counter-trend move has a great probability of occurring.

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