Last updated on October 13th, 2017 at 12:15 am
This is the third, and final, part in our three part series on how to conduct proper Bitcoin price analysis.
In the first part of our guide, we discussed the two prevailing schools of economic thought, the Austrian school and the Keynesian school. We looked at the ineffectiveness of positivism in economics and how taking a praxeological approach to economic analysis yields much more useful data. We then applied the principle of Austrian economics to Bitcoin price analysis and briefly explored the ways in which one would conduct a price analysis using the praxeological methodology.
In part two of our guide, we went over how to actually conduct the analysis. We discussed the importance of news in the Austrian-minded process of price analysis and what kinds of news have the most significant impact on the Bitcoin price. We concluded that only the largest news stories coming from either players in the mainstream markets, governments, or influential people or companies within the Bitcoin community itself have a significant impact on prices. We warned readers of the faulty assumption that every piece of positive news should exert an upward pressure on the Bitcoin price. Then, we went into detail on how to make a proper distinction between long and short-term trends and the importance of price floors in analysis. Lastly, we discussed the proper timing that should be used in conducting price analysis. Attempting to write an analysis too often will prove to be problematic, as price changes can only be explained by examining the actions of individuals. If one tried to analyze the market every day, they would be reporting on nothing but normal, day-to-day activity. Therefore, at the very most, Bitcoin price analysis should be conducted once per week.
This final installation stresses the importance of conducting Bitcoin price analysis with a high level of professionalism and honesty. These two traits are of utmost importance in this area of economic analysis. For the readers of your article could potentially take the information you provide and use it as an advisory resource when considering their course of investment action.
Maintaining Professionalism and Honesty when Conducting Bitcoin Price Analysis
When engaging in Bitcoin price analysis, it is essential that one be both professional and honest in their reporting. As mentioned above, anyone who reads your article could use the information you advance as advice on how to invest their money, even if you claim that they should not. Your article could potentially convince someone to cash out their bitcoins or go all in with their fiat. This puts an analyst with a substantial following in a position of influence in the Bitcoin community. If the writer has enough of a readership, and those readers always follow the writer’s advice, then the writer could have a direct influence on the Bitcoin price. This position of power comes with the incentive to encourage people to act in a way that would benefit the writer. This should not happen.
Any legitimate Bitcoin Price analyst should never give direct advice on how his or her readers should invest their money for the very reason that the analyst would have a strong incentive to give advice that would benefit him or her, rather than the Bitcoin community as a whole. A proper Bitcoin price analysis should contain information that is descriptive and speculative, but never prescriptive.
A price analyst should also be extremely honest in his or her reports. Now, it is of course acceptable to state your opinions and use your personal beliefs in your analysis, as this entire practice is mostly based on speculation and personal opinion anyway. But one should never lie or deliberately make up information that will make their Bitcoin price analysis appear more solid than it actually is. We should never lie in order to avoid being incorrect. We really have to accept the likelihood that we will eventually get a prediction wrong. There is no shame in being incorrect; uncertainty is the essence of the market, so inaccurate predictions should be expected! We should take pride when we correctly interpret the data and use it to make an honest prediction that came true. We should not feel bad or angry, however, when the market does what it is best at and produces something that no one could have ever predicted. Even at the risk of being incorrect and embarrassed, analysts should always give honest opinions and write honest reports.
In summary, a legitimate Bitcoin price analysis should respect the influence that they could potentially hold, and report the data in an honest way. It is acceptable to write biased articles that use your own personal beliefs, as long as you are not deliberately lying about, or fabricating, information to bolster the perceived soundness of your analysis.
Thus concludes the third, and final, installment in our series on conducting proper Bitcoin price analysis. By using the correct economic methodology, looking for the right news stories, correctly identifying trends and price floors, and remaining professional and honest, one can accurately interpret the market data and provide sound analyses with strong predictions for the future of the Bitcoin price.