The reliability of predictions in cryptocurrency

Imagine a turkey being fed every day. Every time the turkey consumes his food, he will believe even stronger that it is the rule of life to be fed every day by his friends of the human race. However, on the afternoon before Thanksgiving, something unexpected will occur. He will be killed and the turkey’s ‘worldview’ comes crashing down.

This example, inspired on the great example of the famous writer Nassim Taleb in his book “The Black Swan”, illustrates one of the reasons why humans have so much difficulty predicting certain trends. I will show, based on my research on predictions in the cryptocurrency market, that relying on charts with ‘trends’ and ‘predictions’ is no better than throwing a coin to make a good estimate of the cryptomarket.

On social media and on a vast number of websites with ‘experts’, many are giving advice in investing in certain coins at certain moments. An excellent example of a website where many are sharing their views is www.tradingview.com/chart/bitcoin/. The charts on this website are also reoccurring on social media. Not a problem, wasn’t it that I was experiencing a growing disinterest in them because they were wrong so many times. Enough reason for me to do an enquiry, calculating how wrong and how good these predictions are. And I have to say that they were (and are) very bad.

I now know, after examining and calculating more than 120 outcomes, how good and how bad the predictions are exactly. A good example is a prediction from someone named ‘ajdougarian’, who published his chart with predictions on june 25, 2017. He predicted that Ethereum Classic (Etc) was going up right after june 25. I then looked at the chart for the outcome a week from the day it was published and it showed that he was wrong because Etc had been going down after his prediction. To be more precise in percentages: the prediction had a deviation from its starting point of 42%.

Left: an example of a wrong prediction. Right: a small sample of my data

By looking at all the data that has been gathered, we are able to tell how many of the predictions are actually wrong or good. 48 percent of the examined people were wrong and 52% of the people right. What this means is that throwing a coin is just as effective as all those so called ‘experts’ predicting the market and publishing their charts on various website’s. Even the users on Tradingview who are marked as pro are not good at predicting the cryptomarket. Of the 31 pro’s in my data, 17 of them were wrong and 14 made good predictions. And if the pro made a good prediction, then most of the following predictions were wrong.

The turkey that counted on an easy life, because of all the patterns his life showed until Thanksgiving, was wrong. The difference between the turkey and the readers of this piece, hopefully, is that we are able to look in hindsight and we can see that we are not good at predicting the market. But we are still using the charts and predictions for trading, given the comments under many of the posts of those pattern seekers. There are a few things we can do to invest wisely, but trusting on predictions of others is not one of them and the past is also not a reliable guide to the future.

P.S : This is my second article ever written in English. If you find any mistakes, please report them to me so that i am able to learn from them..