Cryptocurrencies are well known as a uniquely-volatile asset, as ominous terms like “flash crash” are baked into its very vernacular and the ethos. Since cryptocurrencies became a more-mainstream investment asset in 2017, several of these sudden, unexpected price drops – often referred to as black swans – have turned heads and shocked investors. For years, these black swans were anathema to the investment space where the stock market, which just ended its longest bull market in history, continued to climb higher.
Of course, few black swans were as evident and shocking as Bitcoin’s overnight 50% decline on March 12th. In this case, the global shock from the Coronavirus sent the Dow Jones Industrial Average and other markets around the world into a tailspin. iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) jumped from $38 to $47 that same day. At its lowest point, Bitcoin was trading at $3,600, a significant decline from its trading level just a few weeks ago. While its price has partially rebounded since the drop – At the time of writing, the price of Bitcoin is near $5,100 – the incident is causing many investors, enthusiasts, and casual observers to wonder if they can ever understand digital assets enough to predict their price movements.
Even prominent crypto analyst John Bollinger was shocked by Bitcoin’s stunning price drop. In a tweet, he notes, “Bitcoin fall victim to the COVID-19 panic. I truly did not see that coming, I thought it might act as a safe haven asset.”
Ultimately, the numerous black swan events throughout crypto’s well-documented history make it clear that education alone isn’t the key to accurately predicting crypto. Instead, investors should work to understand digital assets and their potential to help make critical determinations about their efficacy and long-term value.
Predictions are Impossible?
Black swan events, like the one posed by COVID-19, will continue to disrupt both novel and established markets, and they are, by nature, unpredictable. However, other factors make crypto price predictions especially challenging.
As Robert Navalon, CBO of NewsCrypto, a crypto education and investment platform, explains, “Crypto investors need to understand the market and the platforms where they place their money, but that doesn’t mean that they can have a crystal ball that identifies risks before they arise. Uncertainty shouldn’t stop investors from pursuing what they believe in.”
For starters, cryptocurrencies are still an emerging asset. In many ways, it’s difficult to remember a time when Bitcoin, blockchain, and decentralized assets didn’t dominate our attention. In reality, many of these platforms are just several years old, and their real-world implications are daily being sorted out among the millions of people interested in these assets.
“Crypto investors need to understand the market and the platforms where they place their money, mitigate the risk and foresee potential profitable solutions. Combination of all three aspects is necessary for success. This is what we are focusing on with Newscrypto, where we are trying to solve this everyday problem by providing the right information at the right time gathering all the market insights in one place, while also adding technical education into the mix” says Navalon.
As a result, the technology is, to some extent, unproven, and people are still mostly unfamiliar with the asset. When coupled with the media’s perpetual incredulity, it’s clear that investors are, at best, receiving mixed messages.
While black swan events may seem obvious in retrospect, even the best analysts couldn’t predict a global pandemic that’s upending the global economy.
Of course, when it comes to making wise investment decisions, ignorance is the furthest thing from bliss. A crypto education can help investors get a lay of the land that equips them to pursue products and platforms that align with their interests, ideals, and investment strategy.
In addition, comprehensive educational support platforms can equip users to take advantage of these things by providing advanced insights on everything from portfolio generators to whale alerts.
At the same time, interested investors should take time to learn about available opportunities and to devise an investment strategy that rewards prudence and encourages steadfastness under duress. Predicting the next panic might now be possible, but that doesn’t mean that crypto investors can’t operate with intentionality and purpose.
Simply put, can you ever be educated enough to predict crypto. It’s doubtful. Even so, education is the right answer to a comprehensive crypto investment approach, just not the kind that advocates for a self-developed crystal ball to invest effectively.
As investors panic in response to the latest black swan, the intentional, educated investor can work with confidence in his or her strategy and with a broad plan to successfully navigate the burgeoning crypto ecosystem.