Cryptocurrencies and Financial Markets: Predicting What Happens Next...
As we approach the $50,000 BTC level again, everyone is trying to figure out what Bitcoin — and the rest of the markets — are going to do next. In a somewhat different realm of finance, people have been trying to predict what individual stocks, as well as the broader markets, as going to do next... as the Dow Jones Industrials and other indices poke around in record high territory.
Predicting markets is a tall order, of course, and often an exercise in frustration because nobody really knows what's going to happen next. Are we going to head to $250,000 or $25,000 next?
In some ways, trying to predict where BTC will go next week is a bit like trying to predict the direction and speed of the wind, at any given moment.
You pretty much can't, and when you happen to be right, it's usually as much the result of guesswork as it is scientific prediction.
Little known fact: Some of the world's first supercomputers were diverted from their original purposes (cryptology) in an attempt to predict the weather. We still can't predict the weather, except in broad terms. This weekend, our local weather gurus were convinced we would get 12" of snow... but in the end, we got 3" because "conditions changed" and it was a little warmer than expected.
The Longer Term
One of the things I was taught very early in life about the stock market is that if you hold it for LONG enough, you'll come away with a gain.
Predicting the direction and speed of the wind is a bit the same. We may not know which way the wind will blow on Tuesday... but if we do our homework and use all available data, we can establish that there's a pattern that causes a predominantly easterly wind in springtime... and we can place our bets according to that.
For example, if we know that exceptionally large numbers of people will be turning 65 in the next 10 years, it's a pretty good bet that shares in companies serving retirees will benefit.
Problem is that most people — particularly in the cryptosphere — lack the patience to invest for the long term. We want stellar results now!
Hive, LeoFinance and Knowing What We Want
I have long since given up on the idea of "predicting the market" for investment purposes, and that certainly didn't change when I got involved in cryptos.
These days, my "investment strategy" is pretty simple: I just leave my HivePower stake to do its own thing over time. I'm not going to try to "chase" the next great idea.
Meanwhile, my liquid rewards "drip" into a back-up fund for "life's emergencies" until it reaches a specific pre-determined size (currently the equivalent of US $5,000) and once that's reached, subsequent liquid funds will either be powered up or go towards promising community "tribes" and their ambitions to grow and thrive.
None of these things are predicated on, or materially influenced by whether or not Hive, Leo or any other token suddenly "moons." It's fun when they do, but I wouldn't pretend I could predict when that's going to happen next.
The Cost of Constantly Changing Direction
There are people in the world who do extremely well as day traders. What we should also keep in mind about successful day traders is that they are dedicated experts who have extensive knowledge and experience in what they are doing.
In many cases, those years of study and experience makes them able to make more accurate predictions about what the markets will do "tomorrow" than most of us.
The rest of us mortals are better off trying to not copy them, as the cost of dabbling in short term transactions based on "hunches" and technical charts tends result in whatever meager profits we might make being eaten up by market commissions and transfer fees.
It can be very tempting to frequently move from point A to point B because you think "something is about to happen," but it's typically an approach best left to experts... at least from an overall profitability perspective.
Do I sound boring? You bet! If you're just looking for a thrill, by all means be my guest!
As for me, I'm just going to stick to the longer term approach... which currently amounts to a belief that cryptos are going to be around for the long haul, so the smart thing is to hold on and merely observe the various market gyrations.
Thanks for reading, and have a great week!
How about YOU? Do you try to predict the markets? Is it REALLY possible to do so, in the short run? Short term trader, or long term investor? What works best for you? Comments, feedback and other interaction is invited and welcomed! Because — after all — SOCIAL content is about interacting, right? Leave a comment — share your experiences — be part of the conversation!
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