RE: Bitcoin Technical Analysis follow up - More charts & two possible predictions (Flash crash in August?)
Hey man,
first of all, let me thank you for this great analysis. Good job. Appreciated!
I just want to make 1 important side remark: in my view, curves may show some periodicity/seasonality (as you claim), but there is also the element of "what's happening in/with the world" and "how people feel".
I haven't checked what caused the 2013 spike, but the 1H2017 spiked was clearly fueled by broad geopolitical unrest, which made investors nervous/anxious and drove them from traditional exchanges to cryptos. Ironically, when things go bad in the world, you may expect cryptos to do well...
Anyway, my point is (and I am sure you are aware of this) that we should not only be focussing on graphs, but also (1) have a look at what's going on out there and what may happen in the near future (especially on a geo-political level) and (2) factor in that the majority of investors are acting emotionally and will base their investment decisions on fear/euphoria (which will be caused by (1)).
Hi thanks for the comment. My opinion is that the the technical leads the fundamentals & not the other way around. What I mean is that when the chart speak so loud, no matter what is going on in the world, there may be some unexpected event in the world that will synchronise with the chart. Why the same patterns keep repeating through history? why a support or resistance line that formed in 1972 keeps holding true through years, decades & centuries? This is just my opinion but as far as I'm concerned there is no empiric explanation for technical analysis, we just know that it works, just like we don't know why the Fibonacci sequence appears everywhere in nature, we only know is there because we can see it and measure it. For the same reason it appears on the charts, it seems is just how the universe is designed.
Hi,
thanks for your reply.
Though I admit the idea of a grand design (of the universe) is appealing, personally, I don't believe in that. The way I see it, an observation can be explained either by (empirical) facts or, if that isn't possible, by human psychology.
The argument you raise about a long standing resistance/support level. Well, if a certain level repeatedly seems to be a level of resistance/support, we will start believing it will be so again, next time. Why do we believe that? For the sole reason that it was so in the past. However... history will only repeat itself a limited number of times. If history repeated itself indefinitely, it would be all too easy to predict the future.
You justify technical analysis by stating "that it works". I am not denying that. However, there have been many studies, showing that behavioral psychology-based investing outperforms technical analysis. So, no, I don't think one should put all his eggs in the TA basket.
And about the universe: human nature shapes the universe. Not some intangible super creature :-)