TechScape: I no longer predict cryptocurrency. Here’s why | technology

I have been writing about cryptocurrency throughout my career. At the time, one point I’ve always adhered to was simple: Don’t listen to me for investment advice. Today, I want to determine why.

Bitcoin was created in 2009, while I was in my first year at university. As an economics student – and a major geek – it sat squarely at the intersection of my interests. By my final year of uni in 2011, the original cryptocurrency was experiencing its first boom-and-bust cycle. It rose from $0.30 to $32.34 that summer, before crashing again to below $3 when Mt.Gox, the original bitcoin exchange, was hacked. (This will become a topic.)

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It was also the year the Guardian covered the coin for the first time, with Ruth Webman warning: “Its critics in the political realm fear it could lead to the emergence of the online Wild West of gambling, prostitution and global markets for contraband.”

I’ve been looking outside a lot. I wasn’t a regular drug user (see “nerd”), the predominant use of bitcoin – getting mail-delivered pills or weeds from the Silk Road – passed me by, so I found it to be more of an intellectual curiosity than anything else.

This is probably in part because the first thing I remember hearing about bitcoin was an anecdote, possibly fabricated, about someone using their gaming computer to mine currency in their bedroom in a heat wave. On one forum, the user reported that the air conditioning failed, and heat stroke left them with mild brain damage. You can see why I don’t like it.

By the second great boom, I was covering the economics of the new statesman. Here the problem begins.

In the first article I published using the word “bitcoin” — the first time the new statesman had covered the topic — she confidently declared: “This is what a bubble looks like.” At the time, bitcoin was trading around $40 a coin.

She’s never gotten this low again.

I was right that there is a bubble in the near future: bitcoin’s price has doubled in two months, and will double before exploding in less than a month. But the crash, which would have been huge for any other normal asset, was a halving, sending bitcoin to its lowest levels…three weeks ago.

A decade later, the memory of this bold claim still haunts me, and I refuse to predict the future of any cryptocurrency. In fact, I used to joke that the best way to make money, historically, was to do the opposite of what I say.

So I put it to the test.

Alex Hearn’s Bitcoin Investment Strategy

Obviously I am not giving actual investment advice. So I checked every article I ever wrote that mentioned “bitcoin,” and sorted it based on whether the reader thought it was good news for cryptocurrencies. There is an element of value judgment to this, of course: you might not agree with my decision that the story of Winklevii’s launch of the bitcoin price tracker in 2014 is a broadly positive one; Or that story of reopening Mt. Gox hack (another hack) is widely negative. I hope the differences will end in the medium.

Then I paired the stories with the price of bitcoin on the day they were written and asked a simple question: If I had bought $10 of bitcoin every time I wrote something that sounded like bad news, and sold $10 of bitcoin every time I wrote something that sounded like Good news, how has your investment been performing?

Bottom line: You would have spent $420 net on bitcoin, and have a crypto wallet with about 1.1 bitcoin as a result — worth, at market value today, just over $22,000.

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However, getting into the details gives me a little cheer. More than half of that gain comes from a total of just seven pieces written in 2013: six negative and one positive. At the end of this run, I had spent $50 and owned 0.7 bitcoins. These articles have a huge over-the-counter impact, given how much bitcoin has increased in value in the nine years since it was published.

Bitcoin went through two boom and bust cycles in 2013. The first, in April, reached a high of $266. The second, in December it was bigger – much bigger. The price of the coin rose to $1238, and fell to $687. The rush of articles I wrote about the coin when I started at The Guardian, through late 2013 and the first half of 2014, contributed much less to the bottom line, although there are more of them.

It was also the period with the most positive stories about Bitcoin. In 2014, the currency’s potential was still untapped: the idea that bitcoin or the blockchain might prove revolutionary wasn’t cliched promise, but something that might be right around the corner. In that boom, I wrote as many positive stories as negative ones.

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

The timing of the cut wasn’t quite in balance, however, and by the end of that boom, you would have turned bitcoin 0.7 into 0.9 while cashing in as many dollars as you put in. And in that period, this bitcoin could have fetched from $100 to more than $500.

From 2014 to the most recent boom, however, the money you put in would sink into the bitcoin you already own. $10 at the beginning of 2014 bought you about 0.01 Bitcoin, so 10 negative lots from me will increase your position exponentially.

After three years, it will take 30 negative coins to get the same amount of bitcoin. This meant that the impact of the initial coin offering boom – the sector’s first major expansion from a handful of cryptocurrencies to an entire cryptocurrency ecosystem – was muted compared to before, despite stories of Iceland turning into a miner’s paradise and the expulsion of Kodak. Branded crypto tool, which led to a flurry of buying and selling.

And three years later, at the beginning of 2020, an investment of $10 in cryptocurrency will earn you only 0.001 BTC. This is good news for our theoretical investor, because 2020 was my most positive currency report. Stories such as the US government’s seizure of bitcoins used in the Silk Road were a sign of the growing professionalism of the sector, and for the first time, bitcoin was enough to establish the niche of the tech landscape even in a comparative slump, the Guardian newspaper was still covering.

To the latest boom and bust cycle, where – finally – the investor starts losing and I got some of my reputation back. From its peak of $69,000 earlier this year, bitcoin has fallen by a third. I seriously covered the crash, which was by far the most brutal the sector has faced. This means that the tracker has sunk nearly $200 into bitcoin, even as the total value of the holdings has plummeted from a high of $50,000 in March to its current figure.

Do youThen?

The question now, of course, is whether or not the pattern will hold. Will you still make money if I buy when I’m angry about cryptocurrencies, and sell when I’m bullish? Obviously – see above – I’m not about to make any strong predictions, but I doubt we’ll ever again see a sharp increase in price as we’ve seen in the past decade, which means I’ll never make a call that performs as badly as those in those initial pieces of year 2013.

That doesn’t mean I can’t make other awesome calls. Remember Dejitaru Tsuka, the shitcoin that was sold in my name? I broke my rules, warning 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 will now have… £4,000.

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