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When mainstream media or some high-profile blogs etc. report about Bitcoin, does it have a direct effect on the exchange rate?
Are there any examples in the past?
Let’s say an author is about to publish an article about Bitcoin in The New York Times. Would it be smart for the author to buy massive amounts of Bitcoin immediately before publishing the article, in the hope that the exchange rate rises?
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There is no way to attribute Bitcoin price changes to news coverage with precision. Because you can never know the exact reason people are buying or selling.
The situation in Cyprus coincided with Bitcoin price skyrocketing to $245. There were lost of news covering both subjects at the same time but we don't know for sure.
It is logical though, to think that Bitcoin related news does have an impact on Bitcoin price. Especially high profile news and articles on high profile media. But, the content and the tone of the news/article will make a huge difference.
NYT article might push the prices up if it has a positive or even informative tone. It might also cause a drop in prices if it has a negative tone.
The larger the economy the harder it will be to manipulate the price.
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Media coverage actually seems to be a lagging indicator. There were more articles on Bitcoin from April 9th and seven days after than there were from earlier in that month.
But there definitely is a circular relationship. Higher exchange rate causes more publicity which expands bitcoin to a wider audience or reinforces confidence in the currency causing additional investment, ... which raises the exchange rate further, over and over, until it bubbles and pops.
There is a call for journalists to disclose their position if they hold bitcoins and publish an article.
Trading securities using inside information is illegal in many areas, however what is "inside information" with a decentralized digital currency? Also, would insider trading laws apply to something not a security, commodity, or real currency?
The first big bubble was caused by mainstream media articles AFAIK, and in general what you suggest makes sense; I'm not going to write a detailed answer, though. – o0'. – 2013-07-11T10:53:31.477
OT: I misread "Effying of media coverage" O_o – o0'. – 2013-07-11T10:53:51.293
Deliberate manipulation of the price for profit would at the very least be a serious breach of journalistic ethics. It's called "pump and dump", and is generally illegal when practiced on traditional assets like stocks. With Bitcoin it may be impossible to prove and therefore prosecute, but the principle is unchanged. – Neil Bartlett – 2013-07-11T21:46:57.923