Show me the price and I'll tell you the news.

There is a fallacy in the markets that news events trigger the underlying price to move. Proponents of efficient market hypothesis will argue that since an asset's price reflects all public information, a new piece of public information will cause the price to react around that event.

As an old market maker, I see this from the other perspective, one of a large-interest looking for opportunities to capture liquidity. News is simply an event to trigger engagement from otherwise a market that is in relative stasis.

I'm sure you've all heard of the phrase "Buy the rumour, sell the news", which is well known in the financial markets because of just how precisely it models the average trader/investor. More often than not, people will assume that some piece of news is able to drive prices higher or lower, but they are only half right. The other half of the equation is that the price action would have already signalled an impending move, and furthermore, the large-interests are already likely positioned.

In a previous article, I discussed the role of trading edges, and inside information was one which I pointed out that was unavailable to the average trader. Just because it is untouchable for the majority, doesn't mean that it isn't by a select few. It is those select few that will dictate the price action as they have the edge going forwards.

Just take a look at the narratives throughout Bitcoin price. The launch of Coinbase's GDAX exchange was front run with a pump from 160 to over 300 in a matter of weeks. The actual launch of the platform resulted in the price declining right back down to the low 200's. It was a classic case of buy the rumour and sell the news. Heck, their launch page was literally the image above - a rocket going to the moon. It doesn't get cheesier than that!

Similarly, we had the excitement of "CME" and "CBOE" entering the futures game, and that drove speculation all the way to the current all time high. What happened when the platforms actually came around? The price receded back to the mean.

More recently, we had the announcement of Facebook's Libra and there was a lot of excitement around the potential for 2+ Billion people being exposed to crypto through the Libra token. With the expected push back from government regulators, we inevitably had the large speculative front running pump, followed by the return to the mean.

The thing is, everybody expects large-interests such as hedge funds and other institutions to step into the game around some "news" and just simply market buy up the price with billions (or trillions) of dollars. That narrative is unbelievably naive and the institutional players would love to have you continue to think like that. In reality, institutions employ some of the smartest analysts, have the most robust mathematical models, and understand the markets far better than your average pop shop garage trader. They will enter the markets at opportunistic price levels, likely when the general market is feeling very negative sentiment and orchestrate the market in their favour for their exit. They certainly aren't going to jump in on a bull run and blindly buy up the price to the moon.

News pieces are designed and coordinated by the insiders to instigate engagement and trading activity, usually to secure a closing of a position, (and by definition, the building of a new one).

The recent news surrounding the assassination of the Iranian military general sent most of the traditional markets as well as Bitcoin into upside volatility. Many commentators suggested that the news and subsequent price action fed the narrative that bitcoin is a safe haven asset. Potential war scenarios and escalating tensions between countries have usually brought up a scurry of investment flows into these safe haven assets. Gold and US-Treasuries are the biggest benefactors. However, a recent narrative is that Bitcoin is hustling for it's own label as a safe haven asset. Sure enough, it has served as the catalyst during the bank runs of Cyprus and capital controls of China, but is it actually true that the news of the assassination brought about a small rally in the markets and our beloved Bitcoin?

Well, a cursory glance at the chart above of GOLD would suggest that gold has been in a resurgent bull market following years of consolidation. After making a decisive move to the upside late last year, it has formed a falling wedge / channel which statistically has more chance of breaking out to the upside. That was indeed what happened on the 23rd. Without even scouring the news for Gold, it's advancement was already set in stone. The fact that it rallied off the back of further news was non consequential. It is simply playing out what was most likely to happen anyway - regardless of whatever news.

In the coming days, the narrative will be that regional instability in Iran will lead to potential capital flight from the Iranian Rial to Bitcoin. I don't have access to exchange data, not in the US, Europe, or Iran, but I can tell you this. Whatever price appreciation Bitcoin will potentially capture from this news event will likely be in volumes much smaller than the market anticipates. It is this dis-balance of expectation, that allows large interests to drive price action in their favour.

The markets as they stand right now, are not conducive to trade. Bitcoin has neither shown a convincing bottom, nor evidence of a reversal. Participating right now will more likely end up in side ways whip saw action that will see the majority of it's participants take losses.

Next time you see a piece of news, take a look at how price is setting up prior to the news hitting. You'll be surprised and blessed to finally understand that whatever happened, was gonna happen and has been in the making for quite some time.