Bitcoin is the De-facto currency of the cryptocurrency landscape.
It is like what had been said about the US economy. If US has a sneeze, the rest of the world will get a cold.
Take a recent case for example. When forking of Bitcoin was scheduled in mid November 2017, to create SegWit2X, there was a mad rush to buy its currency by Bitcoin fans. It then, reached its highest peak of 7,898.00 USD to-date. It had also caused all Altcoin price rises muted during the above period.
On hearing the suspension of Bitcoin SegWit2X, announced today in an email written by Mike Belshe, CEO and co-founder of bitcoin wallet software provider BitGo, Altcoins responded immediately with rise in their prices (at the time of this reporting).
The Five currencies (w.r.t 1H ago), listed in Blockfolio are shown below.
BTC 7,394.73 USD, a drop of -0.16% of Bitcoin
ETH 312.15 USD, a rise of +0.33% of Ethereum
LTC 63.48 USD, a rise of +1.60% of Litecoin
XMR 115.03 USD, a rise of +0.88% of Monero
XRP 0.22132427 USD, a rise of +0.94% of Ripple
Yet, many had predicted of its fall from grace from day 1 of its emergence, in 2009.
In January 2017, a comment was made about Bitcoin (where the value of a bitcoin reached 1,153.02 USD),
“Liquidity dried up—no shorts, no sellers, which means a volatile little bubble formed quickly,” Peter Smith, chief executive of bitcoin wallet Blockchain, told CNBC.
Everyone has an opinion about Bitcoin price and its direction in 2017 and beyond.
A book titled “Everything we know is wrong!” written by Magnus Lindkvist (who likes to be known as a trendspotter) may provide some answers to the question,
“Why Many Predictions Of Bitcoin Got So Wrong?”
1. Blinded by slow motion
The human brain is highly efficient at detecting change. Introduce a new odour into a room, virtually everyone will sense the discrepancy, and will claim “something isn’t quite right”. If it is introduced in a hard to detect level, slowly but gradually and less drastic, most people will not notice it at all. It is like boiling a frog to its death, in a pot with gradual increase of water temperature. The frog had got so used to the rising water temperature till it was too late to escape from it.
Bitcoin is with us since 2009, about 9 years ago. Along the way, it has many converts of its usefulness as a unit of account by leaps and bounds. It has reached a few hundred million USD worth of transactions daily, sustaining by its raving fans and new converts.
Note:- The news media and the general public had hardly noticed its presence till early 2017. This year, the price of Bitcoin has reached new high, with each passing week/weeks.
2. Seeing through the matrix
We are prone to view and say things in terms of fixed borders or boundaries. Human consciousness is a mystery, but something we do know is the human mind creates rules and regulations so we don’t have to wake up every day and rediscover the world completely. To many of us, a life without the above is equivalent to hell. We dislike change. So, we stick to our belief system and values and go through life happily without much thoughts of “Seeing through the matrix”. Anything that upset the status quo is viewed with suspicion, even though what we believe in may not serve us well.
Nations, borders and industry boundaries were created by someone at some point to serve a specific purpose. In term of banking and financial institutions, they are created as the intermediaries, to incorporate “trust” element in the transactions among people doing trading of goods and providing services. Having a peer to peer transaction in Bitcoin, without a middle man and much lower cost is hard to grasp and accept even though there are many advantages of doing it. The world we’re entering – as yet invisible to some people – will be bigger, better and certainly different from the version we’ve been living in.
3. A shock to the senses
The first recorded use of the phrase “information overload” was used by the futurologist Alvin Toffler in 1970, when he predicted that the rapidly increasing amounts of information being produced would eventually cause people problems. People learn to see the world a certain way, and very few of us are good at unlearning what we know. We have been living in an information abundant society for more than two decades, yet much of our behaviour is still similar to what it was before the rise of the World Wide Web: from schooling, to money matters. We are, after all, routine-seeking creatures who value convenience. “New” facts will require critical thinking of its truth. Hard to do if we are lazy to think. We prefer sexy lies to boring truths.
Subjects like Bitcoin and blockchain are “new” and their implications to our lives are not easily understood by many people. Trying to understand what the “geek” talked about is hard enough. Trying to access reading materials, to sort out the pieces in the puzzle in one place is like trying to “finding a needle in a haystack”. Geek speaks, “Go down the rabbit hole”. So, many take an easy way out, adopt views expounded by the “conventional” Financial Experts and stick to status quo of current practices.
4. Screech to a halt_The trend illusion
We are living in a VUCA world. The speedy transition from boom to bust was seemingly unrivalled and reinforced the popular notion that many thing tend to happen a lot faster nowadays. “Trend” is what we name something we want to control, measure and exploit. Today, stock markets (including cryptocurrency market) move in milliseconds. The reason is that a significant proportion of the trades are made not by humans but by lines of computer code known as algorithms. A fast market is a volatile market. If you stick to logical answers in these cases, chances are that you would do quite a poor job of predicting any price and direction movement of any financial instrument.
The daily huge price swing of Bitcoin is unprecedented in modern times. Its average true range (ATR) could fluctuate from 1% to 15% in a 24H period. Many people like to think that controlling risk – the probability of a certain outcome – was equivalent to controlling the unexpected (a black swan event). Hype and bubble mentality are really just the extreme consequences of linear extrapolation. “Well, it’s really big today so it’s bound to be even bigger tomorrow or vice versa”. This is known as the gambler’s fallacy, where you imagine patterns and order in randomness.
5. Beyond the horizon & Missing The Bigger Picture
All science fiction writers, whether they admit it or not, are writing metaphorically about the present. To extrapolate the future is really to comment on the now…The job of a science fiction writer, historically, has been to understand how technology and social factors interact. – Cory Doctorow
Being locked into present patterns of thought constitutes a giant obstacle against predicting outcome in the future, especially on the kind of scale that society and markets rely on. How do you explain air travel to someone who hasn’t even seen a car? The word “natural” as we can see, has nothing to do with nature’s plan for us but is merely a statistical reference to the most frequent occurrence.
The emergence of Bitcoin as a digital currency is not “natural” to most people thinking. So, prediction of anything from “natural” starting point is bound to fail in the light of reality in the Bitcoin marketplace.
Everyone wants to believe that the worldview that he/she has is true.
“Human perspective is worth 80 IQ points”
“The mind, once expanded by a new idea, never regains its original dimensions”
We prefer most things in our life to be more or less anticipated. Weaving events together is seductive because it makes chaos and complexity seem structured.
With our cognitive bias, can we see Bitcoin beyond the speculative trading aspect on volatility in prices?”
Overall conclusions: – To have better chance of predicting the future direction of Bitcoin, we need to
- sharpen our trendspotting skills and navigate the many puzzling changes that Bitcoin generates in the cryptocurrency world.
- distinguish between hype and actual insights, between fashion trends and megatrends.
(The bulk of the above are extracts from “Everything we know is wrong!” book)
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Flash News (31-Oct-17): CME Group Inc. is planning to have Bitcoin Future Contracts listed in its exchange before end of this year – The implication is volatility of Bitcoin currency can be hedged! It addresses a major concern of Bitcoin’s usefulness as a stable stored currency.
CME Group Inc. (Chicago Mercantile Exchange & Chicago Board of Trade) is an American financial market company operating the world’s largest options and futures exchange.
If you would like to know whether you are ready for it, please read my recent post on “5 Tips To Trade Bitcoin Or Volatile Cryptocurrency”
For cryptocurrency starter, you may like to consider opening an account with Coinbase, a secure online platform for buying, selling, transferring, and storing digital currency.
Note:- If you buys or sells US$100 of digital currency or more through Coinbase using this link, you and your referral will both get US$10 worth of free bitcoin.
Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.
If you’ve any comments, please drop me a line.
Reuben Ong
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