Buy the Rumor, Sell the News: Why Basic Attention Token (BAT) Slipped

Don’t chase Basic Attention Token (BAT) momentum, we warned on November 8, 2018.

As we saw with 0x (ZRX) and Ethereum Classic (ETC), once news of a Coinbase listing was out, momentum quickly faded.  “The same situation may unfold with BAT once the markets had time to fully incorporate the news,” we noted.  “Traders can always buy it on pullbacks.”

Not long back, 0x (ZRX) followed a pretty similar trajectory, though it lasted a it longer.  Of course, speculation drives the prices, and many traders buy in to capitalize on the hype for short-term gains.  Even Ripple (XRP) has been subject to the same sort of ups and downs.  A few months back, it came close to doubling in value as xRapid approached release.  Then following that hype, it dropped almost as dramatically as it rose before, before it once again released exciting news and climbed back up a little.

The Three Phases of the News Cycle

Anticipation of News Effect

Stand at the top of a snowy hill with a small snowball.

Now, begin to roll it down the hill.  As you do, it begins to become bigger and bigger.  It begins to build momentum.  The same thing began to happen with coins on the anticipatory news effect.

If we can spot a potential story ahead of the herd, we can take a position and wait.  We can get a jumpstart with our snowball.  Then, as they begin to wake up to opportunity, our snowball gets bigger and bigger and picks up momentum.  This happened with the Basic Attention Token (BAT) as rumors began that it would list on Coinbase.

Dissemination of News — Stone in Pond Effect

We’re often told that news is immediately priced into a stock upon release.

But that theory is old, and false especially with information friction thanks to the Internet.  As news goes from local to regional to national to global, until that wave of news dies off, the impact is not immediately priced in.  Throw a stone in a pond.  Notice the ripple.  That’s how new dissemination works until the ripples fade and die into nothing.  This also happened with the Basic Attention Token (BAT), Ethereum Classic (ETC) and 0x (ZRX).

Basic Attention Token: Death of News Cycle

Remember how marijuana stocks exploded on Canada’s news of legalization?

When the news began to fade and die, so did related stocks.  The same thing happens with cryptocurrencies.   The pullback in BAT for example, is something that should have been expected all along.  Not because it’s a weak coin, but because this is how news and the market work.

 

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