The Relationship Between News and Bitcoin, as Revealed by 12 Years of Data The cryptocurrency market remains fervent. Mainstream media outlets daily highlight its economic potential, continuously reporting on new technological adoptions and issues. Within investment communities, these news reports are often immediately regarded as investment guidelines. The advice to 'invest based on the news' is now considered common sense rather than a specific strategy. However, recent extensive data analysis spanning 12 years challenges this notion, sparking an urgent discussion about a new investment paradigm. A study that analyzed 64,000 cryptocurrency news headlines examined how closely the sentiment of news headlines is actually correlated with Bitcoin's price volatility. This research, published via Publish0x, raises fundamental questions about the 'news-based trading' strategy long believed by cryptocurrency investors. The research team utilized a vast amount of accumulated news data from the early 2010s to the present to quantitatively analyze how headlines actually influence market prices. FinBERT, the AI model used in the study, is a natural language processing model specialized in finance, classifying headlines based on positive, negative, and neutral sentiment. FinBERT is based on the BERT (Bidirectional Encoder Representations from Transformers) architecture and is trained on financial news and reports to accurately determine the emotional tone of sentences. This model analyzed each headline, quantifying the psychological reactions investors might experience. However, the study revealed that the correlation coefficient between news and price volatility was merely 0.07. This correlation is statistically insignificant, meaning the influence of news sentiment on Bitcoin's price movements accounts for only 0.5% of the total volatility. In other words, 99.5% of the reasons for Bitcoin's price movements are determined by factors unrelated to the sentiment of news headlines. This finding contradicts a common belief among investors, demonstrating how exaggerated the idea that news significantly impacts price movements truly is. The research team characterized this phenomenon as a 'cognitive illusion,' pointing out that investors tend to overestimate the causal relationship between news and price fluctuations. Many investors expect the market to react immediately when significant news breaks. However, this study suggests that such expectations are largely unfounded. While news can often influence the short-term perceptions of market participants, this is merely a temporary emotional factor. The primary causes of price fluctuations are determined by more fundamental and complex factors. For instance, market liquidity, changes in large investors' positions, macroeconomic indicators, and technical analysis signals can act as much stronger price determinants than news. Notably, even during periods of extreme market volatility, cryptocurrency news headlines played a negligible role in conveying price signals. Investors typically expect news to explain the reasons when the market surges or plummets. However, according to the study, even during such times, approximately 61% of headlines focused on general industry trends such as blockchain partnerships, startup funding, stablecoin updates, NFT development, and Web3 gaming. While these news items may contain important information related to the development of the cryptocurrency ecosystem, they offered little help in predicting or explaining immediate fluctuations in Bitcoin's price. The research team compared these headlines with identifiable price signals, but none showed a clear correlation. In terms of providing 'excellent signals for price changes,' which target readers expected, most news failed. This illustrates the paradox that while news outlets cover various topics to attract readers' attention, they often fail to provide information on 'price direction,' which is what investors most want to know. Conversely, regulation-related news was identified as the only category showing some degree of correlation with price movements. Approximately 21% of the analyzed headlines consisted of regulatory content, with government cryptocurrency policy changes or regulatory actions playing a particularly significant role. The research team explained that regulatory announcements are external events, making them the only category that might have a causal relationship with price. For example, announcements of enforcement actions by the U.S. Securities and Exchange Commission (SEC), the enactment or amendment of cryptocurrency laws in various countries, and changes in banking regulations have indeed had a measurable impact on the market. The Reality and Illusion of Cryptocurrency Investment Strategies: Expert Opinions? The increase in Bitcoin's price volatility immediately following SEC enforcement action announcements supports this. What differentiates regulatory news from other type
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