What I�ve Learned from Bitcoin Technical Analyses


Here’s the summary of technical articles out there at the moment purporting to tell us what is going to happen in the next hour, day or week: The price is going to go up, � or maybe down, � or potentially waver in a range.

That may not be tremendously informative, but it pretty well summarizes what I’ve gotten out of reading daily technical analyses of the Bitcoin price over the last several years. Despite this, when I used to run technical analysis on this site, these would be my highest performing posts, and from the plethora of these posts on other Bitcoin news and commentary sites, I can only think that they continue to be a huge draw or why keep writing them.

Now, for the record, I have no formal financial education, and I am fully willing to believe that a trained professional with an established strategy based on tested metrics may be able to make enough right calls to beat the flip of a coin and make a profit. He or she may even be able to profit handsomely. For those folks, reading these analyses is probably a waste of time�the people who know what they are doing don’t need to read predictions written for the financially illiterate.

That being said, the fact that top performing hedge fund managers are almost never able to keep their winning streaks going beyond a year or two and then frequently underperform the market might suggest that even the best money managers are doing little more than throwing darts at charts.

The point of all of this is that I’ve gotten tired of reading the tea leaves on Bitcoin price movements. I still watch the price for signs of life, and feel I have even learned a few things that I’d like to take a few minutes to share with you:

  1. Predicting the direction of a market is as much an exercise in mass-psychology but Bitcoin is so small a market I could practically move it myself if I tried to sell all my coins at once. All the talk of trend lines, double tops, head and shoulders patterns, etc., are really nothing more than a way to try to spot how people in general are feeling about Bitcoin. That works often enough, perhaps, but the real movements in Bitcoin usually come with sudden large purchases, and all-too-often, sales of coins. This isn’t 500 or a 1,000 people deciding to each sell a coin at the same moment, this is one or a small group of people deciding to do it. Predicting this is impossible and makes thinking about day trading a nutter’s game for anyone but someone who really knows what they’re doing.
  2. The news rarely sways the market. In the last few years we’ve seen some really incredible news about the advances Bitcoin has made come out, and we have seen some terrible setbacks. My observations about how Bitcoin crashes suggests that it is usually predicated on short, periodic massive sales. These do not usually link up with bad news, and rather, over 2014 when there was lots of good news coming out at the same time as Bitcoin kept sliding in price, it became a joke on Reddit that no one should bring up good news else the price should fall even further.
  3. When Bitcoin hits its breakout point, it will not be because of these kinds of short bursts of purchases�no, it will be because the volume of purchases rises showing a strong interest in a large group of people. This sustained interest will bring in more people and speculators, and then we will see the true break out. Further, when this next breakout happens, Bitcoin will have a strong enough infrastructure to be able to handle the inflow of people. The next Bitcoin breakout is likely to be the start of the S adoption curve.

Bitcoin certainly still has a lot of challenges that it needs to overcome � scalability, regulation, etc.�but all indications are that we are on the way to solving those problems in one form or another. I’ve stopped reading the daily technical analyses, but I haven’t stopped looking at how Bitcoin has the potential to spark a real decentralized revolution that began with the liberalization of information via the internet, is now progressing to the liberalization of money, and will next target a fully accountable, math regulated form of government.

I can’t wait.

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