Lesson Thirteen

Yibo's Cryptocurrency Host shares valuable knowledge. Although I can't fully grasp it now, I'll keep it for later review.

Practical Guide to Fundamental and News-Based Analysis in Cryptocurrency Trading
1. What is News-Based Analysis and Why Is It Important
News-based analysis involves tracking public information such as news reports, policy announcements, and technological developments to assess how these factors might influence the price fluctuations of cryptocurrencies. It is one of the core bases for investors' trading decisions.
These news items not only reflect facts but also amplify market sentiment through media—either triggering panic selling or causing FOMO-driven buying (the so-called Fear Of Missing Out). This creates short-term or long-term buying and selling pressures. Moreover, institutional investors often receive information faster. Ordinary investors rely on news analysis to narrow this information gap and avoid becoming "bagholders."
Combining news analysis with fundamental analysis (such as on-chain data and project progress) leads to more accurate insights. For example, regulatory policy changes can directly impact whether a project can operate compliantly. Additionally, sudden "black swan" events like exchange hacks can abruptly reverse market trends, so contingency plans for such risks must be included in news analysis.
The unique characteristics of the crypto market also influence news analysis:
First, 24/7 trading means news can cause overreactions during periods of low market activity and liquidity, leading to sharp price jumps or drops.
Second, sources are often informal—project teams may release news via code platforms or community announcements—so verifying authenticity and authority is crucial.
Third, tokens like Dogecoin, driven by community hype, are highly sensitive to social media messages from celebrities, often having a bigger impact than the project fundamentals.
Fourth, regulatory policies vary across countries; a ban in one country might be offset by favorable policies in another, requiring comprehensive assessment.
Fifth, large transfers and movements of funds on the blockchain can help verify whether news will truly impact the market, reducing the risk of being misled by false information.

2. Key Types of News to Focus On
(1) Macroeconomic Data
Indicators like CPI, PPI, and non-farm employment data significantly influence the crypto market. For example, in July 2025, CPI month-over-month turned from negative to 0.4%, mainly driven by summer consumption boosting service prices. PPI declines narrowed, and in December, it even rose to 0.2%, indicating a recovery in industrial demand. On the day these data were released, Bitcoin's price fluctuated by ±7.2%, demonstrating the impact of macroeconomic data.

(2) Policy and Regulatory Developments
These are critical market influencers, including:
- Whether certain tokens are classified as securities: If deemed securities, they may be delisted from exchanges, reducing liquidity.
- Stablecoin regulation: For example, reserve adequacy and audits for USDT, USDC affect trust and market activity.
- Central bank policies: Rate hikes or cuts in major economies alter liquidity; rate hikes may depress crypto prices, while rate cut expectations can attract capital.
- Tax policies: Changes in taxation on crypto profits influence holding decisions—higher taxes may prompt quick sales, while tax incentives could attract long-term investment.
- Exchange rules: Requirements like KYC and AML may reduce anonymous trading short-term but encourage institutional participation long-term.
- Cross-border payment restrictions: Bans on crypto transfers across borders diminish utility and demand for related tokens.

(3) Sudden Events and Market Sentiment
Unexpected events can cause sharp market swings, such as:
- Stricter regulatory policies triggering panic.
- Large transfers by whales causing FOMO or panic selling.
- Exchange hacks leading to rapid price drops.
- Federal Reserve rate hikes causing capital outflows.
Preparation involves monitoring large fund movements, setting alerts, and using stablecoins for hedging.

3. Building a News Analysis and Trading Framework
(1) Collect and Verify News
- Use multiple channels: news outlets, social media, on-chain data, policy announcements to ensure no key information is missed and real-time updates are obtained.
- Analyze market sentiment: tools to gauge whether traders are fearful or greedy, and correlate sentiment with price movements.
- Focus on key figures: statements from project leaders, major investors, regulators can directly influence market expectations.
- Set early warning systems: algorithms that combine historical data to identify black swan events like exchange hacks or policy shifts.
- Verify authenticity: cross-check large transfers and fund movements via blockchain explorers to avoid misjudging based on a single source.

(2) Develop Analysis and Decision Models
Core capabilities to enhance:
- Data collection: quickly gather and organize exchange traffic, large holdings, social sentiment.
- Algorithm evolution: use machine learning to improve detection of fake news and market sentiment analysis.
- Risk control modeling: handle abnormal market volatility and black swan events by analyzing volatility, leverage ratios, etc.

(3) Timing and Risk Management
- Consider news timeliness: for example, traders may buy anticipation of good news and sell after it materializes; set rules for phased profit-taking.
- Manage volatility: hedge risks with options before major news releases, aiming for gains.
- Set stop-loss orders: automatically reduce positions when prices move beyond normal ranges.
- Diversify risk: hold both strong and weak tokens to lower overall risk.
- Adjust leverage: reduce leverage during panic to avoid liquidation.
- Conduct backtests: simulate trading based on historical extreme news scenarios to evaluate and optimize strategies.

4. Refining Focus on Key News Points
(1) US Dollar Economic Indicators
- Inflation data: reflects dollar purchasing power and influences crypto capital flows, e.g., CPI, PCE (Fed’s preferred inflation indicator).
- Employment data: non-farm payrolls, unemployment rate indicate economic strength and influence Fed policy; low unemployment may lead to rate hikes.
- Wage growth: rapid wage increases can sustain high inflation, which is risky for crypto assets.

(2) Details of Crypto Regulatory Policies
- Compliance requirements: changes in rules for KYC, AML, e.g., EU’s MiCA framework, alter exchange operations.
- Stablecoin legislation: reserve audits, issuance licenses reshape the market.
- Mining regulation: stricter carbon policies may cause migration of mining farms, affecting supply.
- Tax reporting: US reporting requirements for transactions over $10,000 may reduce large trades.

(3) Response to Global Emergencies
Monitor situations like:
- Geopolitical conflicts: e.g., Russia-Ukraine, where initial buying of Bitcoin for risk hedging may later turn into sell-offs due to capital constraints.
- Financial institution issues: bank failures impacting stablecoins and the broader crypto market.
- Extreme market moves: Bitcoin volatility over 15% in a day can trigger chain reactions; monitor derivatives data.
- Technical vulnerabilities: cross-chain bridge attacks, exchange wallet hacks erode trust and cause price drops.
- Miner sell-offs: when Bitcoin approaches mining costs, miners may sell en masse, increasing supply and depressing prices.
- Institutional moves: decisions by Tesla, Grayscale, and other large players influence market sentiment.

5. Practical Trading Strategies and Pitfall Avoidance
(1) Trading Before and After News Releases
- Pre-emptive analysis: assess sentiment, technical indicators, and fundamentals to position early.
- Rapid response: evaluate impact immediately after news, adjust positions accordingly.
- Manage volatility risk: set appropriate stop-loss and take-profit levels.
- Use liquid trading pairs: ensure quick execution to avoid slippage.
- Multi-timeframe analysis: confirm if news impact aligns with expectations across short and long-term charts.
- Use sentiment indicators: like the Fear & Greed Index to support decisions.

(2) Advanced Strategies
- Hedging: use options and derivatives to mitigate black swan impacts.
- Cross-exchange arbitrage: exploit price differences and funding rate anomalies.
- On-chain monitoring: track large transfers and exchange fund flows in real-time.
- Dynamic rebalancing: adjust positions and leverage based on volatility.
- Circuit breakers: set multi-level alerts to trigger automatic liquidation and control risk.

(3) Avoid Common Pitfalls
- Don’t trust unverified news: establish reliable verification mechanisms.
- Avoid excessive leverage: high leverage can lead to liquidation on minor price swings, especially in illiquid markets.
- Don’t focus only on favorable news: gather both positive and negative information for objective judgment.
- Beware liquidity traps: after major news, some tokens may appear to move but lack actual trading volume—avoid blindly following.
- Don’t chase the market: wait for confirmation of price trends before acting.
- Control emotions: develop and strictly follow a trading plan to prevent impulsive decisions driven by fear or greed.

6. Core Principles and Future Focus
(1) Remember the Core Principles
- Reliable news only: base decisions on authoritative media, project announcements, and on-chain data; avoid social media rumors.
- Quantify sentiment: use tools like the Fear & Greed Index, long-short ratios to gauge short-term price directions.
- Monitor cross-market links: analyze how traditional assets like stocks and gold relate to crypto, and how macro news impacts the market.
- Assess liquidity: ensure exchanges can handle trades smoothly during major news releases to avoid slippage.
- Categorize news: assign importance levels (e.g., protocol upgrades, regulations, institutional holdings) and develop tailored responses.

(2) Future Key Areas to Watch
- Policy trends: regulatory developments and CBDC progress are major market drivers.
- On-chain data: large transfers and exchange flows help anticipate big fund movements.
- Technological breakthroughs: innovations like Layer 2 solutions and zero-knowledge proofs create new investment opportunities.
- Liquidity: stablecoin supply and exchange reserves can signal market reversals.
- Institutional activity: holdings changes and ETF approvals influence market direction.
- Sentiment monitoring: real-time tracking of Twitter, Reddit discussions helps forecast short-term trends.

(3) Continuous Improvement of Analytical Skills
To keep improving, follow these four steps:
- Current assessment: evaluate the accuracy and speed of your analysis methods; set benchmarks for optimization.
- Identify weaknesses: whether in technical indicators, sentiment monitoring, or on-chain analysis.
- Develop plans: design how to select news sources, optimize models, and strengthen risk controls.
- Implement and refine: learn technical analysis, respond to sudden news, and coordinate cross-market strategies; adjust parameters based on trading results.