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TechScape: I no longer make cryptocurrency predictions. here’s why

I have written about cryptocurrency for my entire career. At that time, one point that I have always stood on is simple: don’t listen to me for investment advice. Today I want to quantify why.

Bitcoin was created in 2009 when I was a freshman in college. As an economics student – ​​and big nerd – he was squarely at the intersection of my interests. In my senior year of college in 2011, the original cryptocurrency was experiencing its first boom and bust cycle. It rose from a low of $0.30 to a high of $32.34 that summer, before falling back below $3 when Mt. Gox, the original bitcoin exchange, was hacked. . (This will become a theme.)

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It was also the year the Guardian first covered the currency, with Ruth Whippman warning: “Its critics in the political sphere fear it is giving rise to an online Wild West of gambling. ‘money, prostitution and global bazaars for contraband’.

I was very outside looking inside, however. Not being a regular drug user (cf “massive nerd”), the common use of bitcoin – getting pills or weed delivered by post from the silk road – eluded me, j So I found this more of an intellectual curiosity than anything else.

This may be partly because the first thing I remember hearing about bitcoin was a story, probably apocryphal, of someone using their gaming PC to mine currency in their dorm room during a heatwave. . The air conditioning broke down, the user reported in a forum post, and they suffered mild brain damage from heat stroke. You can see why I wasn’t impressed.

During the second major boom, I was covering the economy for the New Statesman. And that’s where the trouble begins.

In my first published article using the word “bitcoin”—the first time The New Statesman covered the topic—I confidently stated, “This is what a bubble looks like.” At the time, bitcoin was trading at around $40 a coin.

He never fell so low again.

I was right to say that there was a bubble in sight: the price of bitcoin had doubled in two months, and would double another two times before bursting less than a month later. But the crash, which would have been huge for any other normal asset, was about a halving, taking bitcoin to lows of… three weeks ago.

A decade later, the memory of that bold claim still haunts me, and I refuse to make any predictions about the future of any cryptocurrency. In fact, I started joking that the best way to make money, historically, is to do the opposite of what I say.

So I put it to the test.

Alex Hern’s Bitcoin Investment Strategy

Obviously, I don’t give real investment advice. So I went through all the articles I’ve written that mention “bitcoin”, and sorted them based on whether or not a reader would think they were good news for crypto, or bad news. There is an element of value judgment to this, of course: you might disagree with my decision that a story about Winklevii launching a bitcoin price tracker in 2014 is broadly positive; or that a story about reopening Mt. Gox after a hack (another hack) is overall negative. I hope the disagreements balance out.

Then I compared the stories to the price of bitcoin on the day they were written and asked a simple question: if you had bought $10 worth of bitcoin every time I wrote something that seemed like a bad news, and sold $10 worth of bitcoin each time. I wrote something that sounded like good news, how would your investment have performed?

The bottom line: You would have spent $420 net on bitcoins, and thus you would have a crypto wallet containing around 1.1 bitcoins – worth, at current market value, just over $22,000.


Going over the details, however, gives me a bit of joy. Well over half of this gain came from a total of just seven articles written in 2013: six negatives and one positive. At the end of this run, you would have spent $50 and own 0.7 bitcoin. These articles have an outsized influence on overcomputation, due to the rise in value of bitcoin in the nine years since their publication.

Bitcoin went through two boom and bust cycles in 2013. The first, in April, took it to a high of $266. The second, in December, was bigger – much bigger. The price of one coin shot up to $1,238 and fell to $687. The rush of articles I wrote on currency when I started at the Guardian, through late 2013 and the first half of 2014, contribute much less to the bottom line, although there were more .

It was also the period with the most positive stories for bitcoin. In 2014, the currency’s potential was still untapped: the idea that bitcoin or blockchain could prove revolutionary was not a hackneyed promise, but something that could be just around the corner. In this boom, I wrote as many positive stories as negative ones.

For every bitcoin story hitting an “all-time high” of $269, there was another around £1m hack of a payment processor. For every long feature asking if bitcoin was about to change the world, there was a warning from a Dutch central banker that the hype was “worse than tulip mania” (and he should know that).

The timing of the coins didn’t quite balance out, however, and by the end of this boom, you would have turned your 0.7 bitcoin into 0.9 while cashing in as many dollars as you put in. And during this period, these bitcoins would have gone from $100 to over $500.

From 2014 to the most recent boom, however, the money you invest would start to be drowned out by the bitcoin you already own. $10 at the start of 2014 bought you about 0.01 bitcoin, so 10 negative coins from me would have increased your position significantly.

Three years later, you would need 30 negative coins to acquire the same amount of bitcoin. This meant that the impact of the ICO boom – the first of the industry’s big expansions from a handful of cryptocurrencies to an entire shitcoin ecosystem – was muted compared to what happened before, despite the stories that Iceland would become a haven for miners and Kodak would release a branded cryptominer, leading to a wave of buying and selling.

And three years later, at the start of 2020, a $10 investment in cryptocurrency would only earn you 0.001 BTC. This is good news for our theoretical investor, as 2020 marked my most positive report on the currency. Stories such as the US government’s seizure of bitcoins used on the Silk Road were a sign of the growing professionalism of the industry and, for the first time, bitcoin had enough of a presence on the tech scene that even in a comparative crisis , the Guardian was still covering it.

Let’s move on to the last boom and bust cycle, where – finally – the investor starts to lose and I get some of my reputation back. Since peaking at $69,000 earlier this year, bitcoin has fallen by a third. I diligently covered the collapse, which was by far the most brutal the industry has faced. This means the tracker has sunk almost $200 in bitcoin, and even so the overall value of the holdings has fallen from a high of $50,000 in March to its current figure.

Whsee you next time ?

The question going forward, of course, is whether the model holds up. Will you still make money if you buy when I’m grumpy about crypto and sell when I’m bullish? Obviously – see above – I’m not about to make any strong predictions, but I doubt we’ll ever see a price increase as big as we’ve seen over the past decade, meaning that I will never make a call that plays as badly as the ones in those initial plays from 2013.

Which doesn’t mean I can’t make more terrible calls. Remember Dejitaru Tsuka, the shitcoin that was sold with my name? I broke my rules and warned readers, “I don’t think you should buy this shitcoin, or any other.” Well, if you had bought £10 worth of Tsuka when I said that, you would now have…£4,000.

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