While the diversity of these opinions may be daunting in itself, there are a few reasons why we should be careful with trusting forecasts.
First, the crypto-verse is young, and we don’t know all its laws yet. Unlike traditional finance which has centuries of data for us to analyze, it still has little of it. And even though some financial and psychological models do work with crypto, the margin for error – as well as the margin of surprise – is wide. Add the volatility, and it becomes very challenging to make precise forecasts.
Second, some bulls and bears will make the exact prognoses over the years, regardless of the context and situation. Even though a strong belief deserves respect, a fixed opinion like this may have more to do with personal opinions than facts, and blur the real picture.
And third, the purpose of some statements is pure manipulation: so people would behave in a certain way that brings the expert profit. An example of that is making pessimistic forecasts so that investors would get rid of their assets, and buy low when they do.
So how do we keep our heads clear and know who to trust? Here is the list of questions that can help us make better investment decisions.
- What is the background of the expert? Do they have relevant experience?
- Does the person own any cryptocurrency? Can they pursue self-interest?
- Does the prediction seem too good to be true, or too dramatic?
- It is backed up by accurate data?
- Are there other people who share this opinion?
- Does the expert have a history of bullish or bearish prognoses?
- What is happening in the world at the moment? Am I seeing the full picture?