In the world of investing, there’s a common expression that goes “buy the rumour, sell the news”.
But what does this phrase mean?
The market tends to price in a new development before it happens. As a result, the anticipation of an event can sometimes outweigh its actual impact.
Unfortunately, this can lead to uneducated investors losing significant amounts of money when prices drop after the event occurs.
So, how does this happen? When people have access to insider information, such as a network upgrade or partnership, they can build a position before the information becomes widely known. This attracts new investors to the project, causing a wave of new money to come in. Those who got in early then begin to secure significant profits.
That’s why it’s not uncommon to see a bullish piece of news followed by price volatility. The “smart money” is selling on the news to hopeful investors who are buying in late. This phenomenon can be seen time and time again when hype outpaces actual utility.
To get in before the rest of the mainstream, it’s important to apply a rigorous analytical process to a project. This means understanding the project’s roadmap, past success, and progress towards meeting targets. Engaging with the project’s community and team is also crucial, as well as reviewing analysis products that measure social trends on search engines and social media.
It’s worth noting that investing based solely on market sentiment is high risk. If there is strong market sentiment but poor fundamentals, the investment is unlikely to have long-term potential.
To avoid leaving yourself exposed, it’s important to exit at the right time.
At CCI, we guide our clients to consider the risks around trying to game market psychology before making serious investment decisions.
Our clients learn to apply a rigorous analytical process to their investments, giving them the tools they need to make informed decisions.
If you want to be part of the CCI Team and learn from like-minded individuals on a mission to better their lives.
Message us and find out more – Click here!
Joe Shew
Founder & CEO of Crypto Consulting Institute
Sam McDonald
Head Analyst
