When you first venture into bitcoin, you’re likely to be doing it on your own, without any support, and you’re going to be searching for information online. Despite the growing body of knowledge in the bitcoin space, with books, podcasts, blogs and videos, everyone’s journey is going to have a different entry point, and you’re going to bump your head a few times down as you tumble down the rabbit hole.
Finding the bitcoin signal isn’t a straightforward path. There is no bitcoin university; there isn’t some formal schooling, accredited course or trusted centralised entity that is the arbiter of truth. You’ll have to walk the path yourself and find resources that are trying to teach and not trying to sell you on anything.
To make it worse, there is a plethora of online charlatans and an entire industry dedicated to misleading new bitcoin investors. Their entire reason for existing is to create situations where you take on risks you don’t quite understand, and they profit from it. While I could go on plenty of rants, today’s will be focused on the technical analysis of snake oil salesman making their living through YouTube, Twitter, Discord and Telegram.
What is technical analysis?
Technical analysis is a trading discipline employed to evaluate trading opportunities by analysing statistical trends gathered from trading activity, such as price movement and volume. Technical analysis has some merit but is only part of evaluating the performance of an asset yet many pretend as if this is the be-all and end-all of how to value bitcoin.
Technical analysis tools are used to scrutinise the ways supply and demand for bitcoin will affect changes in price, volume, and implied volatility. It operates from the assumption, keynote here, assumptions, that past trading activity and price changes of bitcoin can be valuable indicators of the security’s future price movements when paired with appropriate investing or trading rules.
It is often used to generate short-term trading signals from various charting tools. Still, it can also help improve the evaluation of a security’s strength or weakness relative to the broader market or one of its sectors. This information helps analysts improve their overall valuation estimate.
Technical analysis is often labelled astrology for finance bros, and I can see that. When you make claims like oh, the price has always bounced off this level when it’s hit that price level in the past. Therefore it will do it again; you’re creating stories to explain these movements, not finding underlying reasons.
It’s as if you’re saying the pavement always gets wet when it rains on Wednesday, so if I wet the pavement next Wednesday, there’s a high probability of rain. Making an observation and adding your own rationale to said observation does not make it true.
No one can simply look at a price, volume and supply, order books and derive much value from those indicators.
It’s more of a fugazi, in my opinion.
Building a narrative
The technical analysis influencers’ job is to wake up in the morning, pull up the chart look at the price. If it’s trending up, they’ll hit the internet in search of some positive or negative news stories. Once they have a story to back up the price movement at the time, they’ll head over to social media and create some meaningless content where they talk about the price and associate some arbitrary article and conflate it with the reason why bitcoin could be going up or down.
It could be bullish or bearish calls; it doesn’t matter, as the product they normally sell you on is to use leverage with derivatives contracts to bet on the price movements.
Content overload and memory holing mistakes
The “modus operandi” of these shillfluencers is to create content about price calls constantly. No sane person is going to watch all their content and review all their conflicting ideas because it’s simply too much to go through every day. Who really has the time to download all these videos and posts, overlay them on charts and prove that their failure rate is probably in the high 90% range? No one, so they keep getting away with this content farming.
The constant barrage of posts is only meant to funnel users into their marketing funnel and not to provide any real insight or value.
As time passes and hindsight exposes them for bad calls, what these influencers will do is remove the videos and posts of their bad calls and leave up the ones that did pan out and pretend to be some oracle that constantly calls tops and bottoms.
Creating funnels of cannon fodder
As the content machine keeps rolling on, their goal is to weed out anyone who has any common sense and to create an echo chamber of desperate and naive individuals that will continue to support their content. They will follow the lifestyle content, they will watch the live trading, they will see the “profitable” trades, and it all sounds so easy and glamorous.
Over a long enough timeframe, more of these viewers will eventually succumb to a product like a paid group, signal service or trade on the influencers’ affiliate account, which nets them a commission. It’s all about selling you on the possibility of getting rich quick, on easy money and that technical analysis is the key to it all, and of course, this person’s chart reading skills are second to none.
The sponsored account
In some cases, these influencers strike up exclusive deals with certain exchanges that offer to fund their accounts which they can use for marketing purposes. They’ll live stream and post online showing you live trades with real money, but what they don’t tell you is that it isn’t their money; it’s the exchange floating them a balance to play around with for content creation purposes.
These sponsored accounts are a great way to reinforce their authority by vanity metrics. Users will see the influencers follow numbers, the material possessions they promote on social media and the size of their trading accounts and think these traders are 100% legit and trading is how they fund it all.
Where is the real money made?
These traders aren’t sitting around analysing chart patterns all day, sizing up positions, and taking risks in the market oh no. They’re encouraging their horde of followers to take the risk while they pocket the commission from sending you to an exchange to get your account wrecked.
These TA guys and girls have one job as salesman for risky financial products. Their job is to push as many people through their affiliate link as possible and provide them with a sense of confidence as if they have some edge over other traders. When you blow up that trade, they pocket a healthy, risk-free reward from your stupidity.
They can then use some of this money to fund their lifestyles, advertise on social media and continue seeking out individuals willing to risk their capital on their bad calls.
As you can see, there’s a disconnect of incentives, these TA guys don’t profit from your success, but from your failure, so it behoves them to create a false reality about the markets and get you excited about a certain trading strategy that has a high failure rate.
Chartist or scam artist?
Have you been caught out by any of these bitcoin chart astrologists? What was the pitch that got you hooked on their calls, signals or financial fairy tales? Was it an expensive lesson to learn?
Let us know in the comments below, we’re always keen to hear from other bitcoiners and their experiences.