Op-Ed

Here comes the New Year! Please stop irresponsibly predicting cryptocurrency prices!

Quick Take

  • Predicting cryptocurrency prices on a short-term horizon is generally used for personal attention growth hacking
  • While low cost to the predictor, these predictions by public figures are irresponsible, as they encourage speculation by retail investors
  • The vast majority of recent cryptocurrency price predictions were wildly wrong
  • It is time to stop making predictions (guesses) and time for the media to stop covering them

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the editorial viewpoint of The Block.


Making short-term price predictions regarding Bitcoin or any other cryptocurrency is a common occurrence on social media. In fact, it is surprisingly common amongst many widely followed and influential crypto personalities, who utilize the large megaphones of their social media platforms. The reason is simple: predictions receive significant user engagement and attract media coverage and eyeballs when they are made. By the time the predictions come due and prove, in most cases to be entirely wrong, most people have forgotten. Given the low cost and high upside, predicting short-term price action is essentially a growth-hacking strategy.

Cryptocurrency price predictions are an action with asymmetric upside for the crypto personality. If the prediction works out, the person that made the prediction can retweet it or bring it up as proof of being a great visionary. The positive upside is nearly unbounded and can help make a career as a crypto advisor. For example, Vinny Lingham, the founder of Civic, has been called ‘Bitcoin Oracle’ precisely because of some of his previously accurate predictions involving the price of Bitcoin. Others have seen the attention bestowed upon Lingham and other early predictors, noticed the advisor positions that arose from this perceived expertise and followed suit with their own predictions.

The downside of a prediction failing to come true is limited, and the negative consequences are minimal. Often times, the prediction is either deleted or retracted when ‘new information is available.’ The wrong prediction is often blamed on some unpredictable market factors that were beyond anyone’s control. A common strategy is to blame the scapegoat called ‘market manipulation.’ In fact, the predictor will often point to their updated predictive hot take as a point of honor and strength: “hey, look at me, I’m willing to adapt when I learn.” Few track the bad calls, and the people who do follow them are often called out as trolls.

Late 2017 and 2018 has been a great case study for cryptocurrency price predictions. The sentiment was extremely positive early in 2017 as the price of Bitcoin was hitting all-time highs almost every day.  On December 17, 2017, it briefly surpassed $20,000. When the prices started going down throughout January, the attitude amongst many was that it was just a temporary “dip” and that prices would recover and reach new all-time highs in 2018. The best time to make optimistic price predictions is when the prices are falling but still near the top.

However, these predictions are irresponsible, as they encourage speculation. Retail investors don’t understand the asymmetry at play and generally believe that cryptocurrency price predictions are straight calls, eg the personalities are putting on trades to back up their own predictions. One only needs to listen to Arthur Hayes, the CEO of BitMEX, who is notorious for making predictions. He laid the strategy out explicitly when he said on CNBC: “It is my job to make predictions, whether or not they are right or wrong doesn’t really matter to me. We make our money when [the price] is volatile.” Hayes simply wants investors to trade; he wins whether the price goes up or down via the increased fees and volatility.

In a perfectly rational world, no one would listen to people who have repeatedly been wrong. However, the twisted reality is that predictors’ influence only grows further, as people tend to follow the loudest, boldest voices in a mania. And in both hopeful and hopeless markets, people want to hear from perma-bulls pushing outsized calls, regardless of the substance they are based upon. It’s human nature to listen to industry insiders because maybe they know something we don’t, right? Who could be wrong if 100K+ people listen to them daily? As we explore below, the answer is: nearly everyone. 

When the price of Bitcoin grew twenty-fold in one year, and most of the industry insiders were agreeing that the bull run was not over, it must have been tempting for the outsiders to buy some as well. It’s naive to think that newcomers didn’t get influenced by the self-proclaimed thought leaders and their confident price calls. And it was the newcomers that suffered the largest losses this year.

Compounding the price prediction problem is the “oracles'” megaphones. Many media organizations covered these ridiculous price predictions on a daily basis, including most main stream media outlets, including Bloomberg. CNBC was the most active property covering cryptocurrency price predictions (see headlines below.) They love those clicks!

As we enter a New Year, let’s stop making concrete short term cryptocurrency price predictions. No one knows what the price of any cryptocurrency will look like in a year; any assertion to the contrary is patently false. As media organizations, let’s dig into the motivations of those people who do continue to make price predictions: what is their likely agenda? And if they won’t stop, let’s turn our backs and stop giving them mainstream media attention.

In an effort to discourage future irresponsible price predictions, here is a record of the current crop of predictions that expire today. The picture isn’t pretty…

List of concrete predictions

Name

Position

Prediction for 2018

Date of prediction

Pierre Rochard

Founder of Bitcoin Advisory

$100,000+

December 6, 2017

Ronnie Moas

Founder of Standpoint Research

$28,000

December 21, 2017

Julian Hosp

Co-Founder and President at TenX

$5,000 and $60,000

December 26, 2017

John Pfeffer

Partner at Pfeffer Capital

$75,000

January 9

Ari Paul

CIO at BlockTower Capital

$6,000 and $60,000

January 14

Kay Van-Petersen

Global Macro Director at Saxo Bank

$100,000

January 16

Tom Lee

Managing Partner at Fundstrat Global

$25,000

January 18

Anthony Pompliano

Partner at Morgan Creek Digital

$50,000

January 19

Phillip Nunn

CEO at Wealth Chain Capital

$6,000 and $60,000

January 26

Jeet Singh

Cryptocurrency portfolio manager

$50,000

January 28

Ran NeuNer

Founder at Onchain Capital and CNBC host

$50,000

February 1

Pantera Capital

 

$20,000

April 13

Arthur Hayes

CEO at BitMEX

$50,000

May 15

John McAfee

CEO at Luxcore

$15,000 by June

May 24

Nicholas Merten

DataDash YouTube channel

$50,000

May 27

 

List of non-concrete predictions

Name

Position

Prediction

Date of prediction

Michael Novogratz

CEO at Galaxy Digital

“Bitcoin could be at $40,000 at the end of 2018. It easily could”

November 27, 2017

“I think [crypto] is going to be the biggest bubble of our lifetimes by a longshot”

November 28, 2017

“Bitcoin May Dip to $8K”

December 22, 2017

Tuur Demeester

Founder of Adamant Capital

“I think it’s crucial to prepare psychologically for huge bear phases in Bitcoin”

December 9, 2017

“Cooldown period may be required to recover from the parabolic rise of Bitcoin and many other crypto assets”

January 21

Meltem Demirors

Chief Strategy Officer at CoinShares

There will be a much bigger run coming in 2018

December 11, 2017

Vinny Lingham

CEO at Civic

Bitcoin Cash will be in greater demand than actual bitcoin in the future

January 25

Tone Vays

Independent Consultant and Researcher

Bitcoin may fall to $1,300 before rocketing to $20,000 (not time specific)

February 9

 

Headlines

Source: CNBC

Source: CoinTelegraph

Source: CNBC

Source: CNBC

Source: CNBC

Source: CNBC

Source: WSJ

Source: CNBC

Source: RT