What can crypto traders learn from astrology?
Crypto traders in another era would probably have made decent astrologers. Why? Because we seek out any faint signal from the heavens that might shed light on the maddeningly random ways crypto prices behave in this world.
Now, most crypto people don’t consult celestial charts to predict token price movements, we’re more evolved. We use Bollinger Bands, stock to flow functions, 200 day moving averages, and every so often we foresee some giant terrestrial event that signals a shift is coming. No, not the summer solstice. I am talking about the halving.
So what about all the technical tools we have become accustomed to in the past few years? Those crypto oracles and twitters showing the strong correlations between current trading patterns and a forthcoming big price movement? Yep. Here is my take. A few of these analytical tools do a fantastic job explaining the past with a 90 percent-plus confidence interval. They do a great job of assigning expose the reasons why something happened. In other words, they do an impressive job of telling you why bitcoin hit a three thousand dollar price last year.
We all like clean explanations, but these technical methods are explaining the past. Okay, but we want to know about the future. Do these models have any predictive power? Can you plug in some numbers into a formula and pop out the price of bitcoin six months from now? No, you can’t. Not consistently, anyway.
What is enticing about all these formulas and chart readings is that they make it appear that if only we had used them last year, we would have made a killing. It reminds me of Thomas Hobbes's comment – “hell is truth seen too late.” By the way, one point I have to make here is that you actually are not really explaining the past anyway. These models create an illusion of explaining the past because the data fits so well in showing you why the token price moved the way it did. The fatal assumption here is that correlation equals causation, which it doesn’t.
Here is my advice - when trying to predict the future about cryptos, use a fast and frugal method. In other words, the simpler your approach, the better. So let us skip astrology and pseudoscience chart readings and explore what needs to happen for cryptos to experience a big increase in value. And I don’t mean the obvious stuff - lower costs, faster transaction speeds. Create a list of the 1, 2 or 3 things that you think is going to happen and when those things do happen, they will be great news for cryptos and the blockchain industry in general. Ideally, a thing or things that you believe are inevitable, you just do not know when. Focus on developing that list to build your own personal outlook for a crypto or cryptos. You can even come up with things that would have a negative effect if you have one or two of those things in mind. A few years ago, one of those things on my list was the coming futures markets for bitcoin. In that case, I thought futures would have a negative force on the price of bitcoin and so far it looks like that's been the case.
So here are three things today that I think will spell great news for cryptos when they arive. The first is better custodies solutions. When institutional investors, the big players who have yet entered the crypto market, are comfortable with the way their crypto holdings can be stored and transferred, you will see a lot of money on the sidelines coming in. I think of it as a necessary condition for broad adoption of cryptocurrency. The reason for that, by the way, is that cryptos are bearer instruments. Bearer instruments are assets where the holder is presumed to be the owner meaning if I steal your bitcoin, and I now hold in my wallet, it is mine. One of the reasons I believe that top-notch custodies solutions are essential to driving crypto adoption is that we have already had an example of something very similar. Years ago, people who traded bearer instruments needed a safe way to store them but also be traded. So some smart people in Europe created a platform for doing just that and today that company holds trillions of dollars of bearer instruments that get traded hundreds of trillions of dollars per year.
The second thing I am going to be tracking is video gaming on the blockchain. Now, I have talked a lot about this and we already have some activity here, but it is small. What I am waiting for is when developers discovered the ideal way to incorporate blockchain capabilities into video gameplay. When we discover the right business model for video gaming on a blockchain, you will see a tidal wave of developers rushing in and that will make blockchains that provide the best experience for blockchain game developers and players very valuable.
The last thing I am going to mention here is the coming shift to the next generation utility token models. I am talking about tokens that capture value from some off-chain activity. Now we have seen big improvements in this area in 2018 and 2019. Binance token led the way in exchange-issued tokens. These tokens indirectly benefit from the activity on the exchanges by paying out a portion of their profits to the tokens holders but this is still a niche movement. I am looking out for changes in the utility token economic models in 2020 and maybe 2021. Those are my top three things that I think will have a big impact on cryptos.
Come up with your list and start tracking it. If you like what you have heard on this video, please hit subscribe and I will talk to you next time.
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