Technical analysis: the most shoddy guesswork ever.
When it comes to crypto, everyone likes to speculate. Why does everyone like to speculate? Ah yes, well, if we speculate goodly we can make millions of dollars within a single cycle, and who doesn't want millions of dollars? Greed is a driving economic force that we can not ignore. Ideally we'd like to see more abundance and generosity, but the world is far from ideal, is it not?
One of the major themes when it comes to crypto predictions is this idea of diminishing returns. As Bitcoin and alts grow in size they become harder to pump, and thus volatility decreases over time. Logistically and rationally this makes sense. This is how we've seen other markets play out so we project that outcome onto blockchain.
But that's the thing about Bitcoin, isn't it?
Crypto is a completely irrational unicorn sent from the heavens like an asteroid at the dinosaurs. We can not superimpose our old notions of legacy finance onto it. All attempts at doing so have failed miserably, and yet we keep doing it over and over expecting a different result. How many times does this technology need to throw us a curveball before we finally admit we don't understand it at all? The prideful will never submit. Only the penitent man shall pass.
There are many theories about what Bitcoin will do next, and derived from those theories we expect alts to perform similar movements, but even more exaggerated. In my opinion this is also a mistake; an unneeded abstraction and extra variable mucking up Occam's Razor. If you want to gamble it's better to avoid casting a wide net and instead focus on one or two convictions.
Popular Macro Theories:
- log curve
- stock-to-flow
- power-law
- s-curve
- super-cycle
But how much evidence is there really to support any given theory?
Well actually there's basically no evidence whatsoever. Bitcoin is a very new thing. To a person 15 years might be a long time but as far as history is concerned it's a spec of dust in the wind. There's a massive amount of relativity at play.
Here we have Bitcoin on a log scale going back to 2014.
And what does everyone want to know? Well, they want to know whereabouts the next peak is going to be so they know when to sell and buy whatever stupid thing they are going to buy with it #lambo. More responsible investors would like to take that and reinvest it into the bottom for a massive windfall over the next cycle. Every single macro price model under the sun that degens have dreamed up is derived from this chart, using this data.
Three halving events; Three peaks; Two insights.
So this idea that Bitcoin is slowing down, experiencing diminishing returns, and getting less and less powerful every cycle... where does it come from? It comes from the bare minimum amount of data possible: two. Just enough to connect one dot with another, and many people within the cryptocurrency space blindly accept this as the truth.
Of course I'm not claiming otherwise; just pointing out the obvious. These conclusions couldn't have any less evidence than they do now. There are three peaks, and there are only two differentials between those three peaks.
- 2013 >> 2017
- 2017 >> 2021
This is the basis and foundation of almost every price model and conclusion on a macro level. The model has to fit the data, and the data itself is almost non-existent because it's a 4 year cycle. The first four years don't even count because BTC started at a value of $0. Try to extrapolate that and Bitcoin has gone up infinity percent. It's a divide-by-zero error.
- 2013 peak ~$1000
- 2017 peak ~$20000
- 2021 peak ~$70000
Ah you see it must be true!
2013 to 2017 was an x20 but 2017 to 2021 was only an x3.5. Clearly 2025 will be even lower! Again a lot of people blindly believe this, but what is even the math on that? What will be the peak in 2025? $210k? That's a good x3 from the old peak. More than enough, yeah?
Not many are considering that going from x20 to x3.5 is a wildly volatile swing. They create a model that fits the data and draw a straight line to show this or that peak on the next cycle. But is anyone going to really be that surprised when every model gets destroyed next year and it does something random like an x10 to $700k? You shouldn't be. Just remember that it will always make perfect sense in retrospect and they'll just create another busted model to explain it away and try fail to guess the next top.
This is why trying to guess the top is a bit of a Fool's Errand. It's way to volatile and unpredictable and depends on a bunch of totally unknown variables. It's much easier to predict the bottom but even that can be tricky. To me it was obvious that when FTX collapsed and we only dipped from $20k to $16k that this was the absolute rock bottom... and I still sold a little Bitcoin there because I was forced to as a distressed seller like so many others. These things happen.
The absolute best is when traders try to employ technical analysis on a memecoin. I've gotten a couple calls right on Bitcoin this year and people started asking me to chart this or that random token that booted up yesterday. Are you guys serious? All that matters is if some dude with money randomly decides they are going to ape into the coin or not. The answer isn't in the chart. The secret ingredient: is crime. You can't insider trade the relative strength index.
Conclusion
Every macro price-prediction model for crypto is based on Bitcoin, and Bitcoin has only fully gone through 3 relevant cycles thus far. All these models are based on complete vapor while the people on social media shilling them pretend to be 1000% convinced as to the authenticity of the prediction. Why is that? Because social media rewards their arrogance, hubris, and embarrassing over-confidence. Because people are greedy and will follow their fearless leader off a cliff under the false premise of get-rich-quick. Ask yourself: when has anyone on social media ever made their followers rich in literally any scenario? I'll wait.
Beware the false prophets.
The interesting thing about Bitcoin is that while there are no top or bottom signals in terms of price targets there absolutely are top and bottom signals in terms of time (scarily accurate ones). Green Green Green Red. It's really not that hard if we just stick to the cycle and stop thinking this time is different.