Should We Hold ‘Experts’ Accountable for Failed Crypto Predictions?
Former Daily Show host John Stewart famously confronted CNBC Mad Money’s Jim Cramer for his coverage of the 2008 financial crisis, in what turned out to be one of the more monumental financial media events of the decade.
“Your money is safe in Bear Stearns,” Cramer said just six days before the global investment bank went under.
After calling Cramer out in an eight-minute Daily Show segment for being too strongly slanted in favor of the companies in question during the onset of the crisis, Stewart and Cramer went back and forth exchanging blows until both agreed to have Cramer on the Daily Show for an interview.
By the end of the “Jon Stewart–Jim Cramer conflict,” as has come to be known as, Cramer conceded that he could have done a better job foreseeing and covering the economic collapse.
Many believed at the time that financial media would take this event as a driver for change. However, much like the activity on Wall Street that caused the crisis in the first place, we’re exactly where we were 10 years prior.
Enter: the cryptocurrency market
Crypto brings all the speculation and risk-taking found in traditional capital markets and turns up the intensity by having 24/7 markets, retail-driven trading and no regulations.
This has created a breeding ground for supposed experts, including fund managers and analysts, to make names for themselves with lofty predictions that feed into the confirmation bias commonly found among investors (and larger society).
Meaning that the current state of the market has made it very easy for analysts to spit out round-number predictions, which many take as gospel given that it aligns with their desired outcomes. This phenomenon is why you never see bearish posts found on the top section of r/cryptocurrency, as the popular trade continues to be long so anything negative is downvoted into oblivion.
“Bitcoin’s going to $25,000!” has been the mantra of 2018 ever since Tom Lee, the co-founder of market strategy firm Fundstrat Global and serial CNBC Fast Money guest, made the bold prediction last October. While Lee should receive credit for seeing Bitcoin’s run-up that took it just shy of $20,000, he has continued to assert that the price will hit new highs yet in 2018.
Other industry leaders have given similar predictions, including Genesis Capital CEO Michael Moro, Billionaire hedge fund manager Marc Lasry, and Michael Novogratz, the CEO of cryptocurrency focused merchant bank Galaxy Digital LP (GLXY), who declared a market bottom just last week.
The short-term predictions that are often thrown around are outrageously wrong. In the case of Bitcoin, predictions made on CNBC have turned out to be wrong 95% of the time, according to a TradingView post by Jacob Canfield. This means that 95% of the time that CNBC makes a price call, taking the opposite position will give investors positive returns.
While this counter-trade phenomenon has turned into a meme, which CNBC strangely jokes about on Twitter, it underpins the destructive nature of predictions in a market based so little on technicals.
Bloomberg’s Joe Weisenthal recently said it best, “One reason to think that we haven’t hit the crypto bottom yet is that there’s still tons of people out there whose reputations deserve to be much more tarnished than they have been so far.”
At the end of the day, the biggest losers from this type of behavior are the retail investors who aren’t able to hedge their bets with options. This ultimately works against mass adoption, as new investors get the perception that cryptocurrency is closer to gambling than anything else.
And yes, in case you were wondering, Jim Cramer has given his own predictions about Bitcoin. Last month, Cramer went on record to say that the current price action as an indicator against the potential for Bitcoin to return to new highs.
However, this negativity came just 2 months after Cramer claimed that Bitcoin was putting pressure on the finance industry.
As everyone knows, the current media landscape in crypto is an absolute minefield, with a good portion of outlets failing to pass even the most basic grammar tests. While we often cover the aforementioned analyst reports and even provide our own take on the market, we recognize the implications of such content. That is why we are making a concerted effort to better include both sides of each prediction to give readers the information to properly conduct their own independent research.
Because let’s face it, no one has a crystal ball and there certainly aren’t any “expert” analysts in this young market that is largely driven by unexpected events.
Photo: Andrew Fecheyr / Flickr
Disclaimer: This article’s author has cryptocurrency holdings that can be tracked here. This article is for informational purposes only and should not be taken as investment advice. Always conduct your own due diligence before making investments.