Predictions and explanations

(Picture from the Internet)

The market broke through overnight, but the direction was downward. Bitcoin once dropped below 32,000, with a daily drop of more than 10%. The market was in panic, and rumors were everywhere. The so-called change that analysts had been talking about for many days suddenly came, catching them off guard. What's more interesting is that the direction is still downward. This made some analysts who predicted that the change would rise feel ashamed. And this plunge broke the technical charts of many analysts. Breaking through 33,000 triggered a superimposed risk-averse sell-off. After the bearish analysts broke through, they directly lowered the price to around 20,000 dollars. More short-term speculators were panicked and even expected to see more than 10,000 Bitcoins.

Many technical analyses may not be as reliable as the Chinese tortoise or yarrow divinations thousands of years ago, or Western witchcraft such as astrology. The latter is at least an external induction system designed based on the axiomatic assumption of "harmony between man and nature" and mutual induction between man and nature. If you are undecided, ask heaven for advice. Many technical analysis methods can be largely governed by Soros' reflexivity. Reflexivity means that rising prices will lead to more rising prices, and falling prices will lead to more falling prices. Perhaps from a psychological or philosophical perspective, Soros has simply moved the ideas of the herd effect, the herd effect, and Le Bon's "The Crowd" to the financial market, and invented a mysterious term to describe the same phenomenon. Technical analysis methods also seek to discover predictions of future prices from prices that have already occurred. This prediction is so ineffective that it requires the evolution of mysterious digital points and geometric shapes in the Cartesian coordinate system. Just as when you have a minor cold, you can accept scientific medicine; when you have an incurable disease, you suddenly become superstitious and try all kinds of mysterious treatments and folk remedies. This desperate mentality is a reflection of the human nature of technical analysts who make absurd choices when faced with ineffective technical analysis methods but cannot give them up.

In the long run, the market is determined by fundamentals and is easier to predict. The shorter the time, the more it is a random walk process, which is impossible to accurately predict. Satoshi Nakamoto said in the Bitcoin white paper that the confrontation between the main chain and the forked chain is a binomial random walk, and the progress of the forked chain is a Poisson distribution. The design principle of Bitcoin is to allow the chain to fork at will from a technical point of view, but always be able to use computing power to resist the fork of the chain. Just like the confrontation between bulls and bears in the market, the price is formed. This price must also be a binomial random walk. Trying to grasp the random process of each moment and accurately grasp the local highs and lows repeatedly is almost impossible. Predicting and grasping the moment is a gamble. Nine out of ten gambles are lost, so don't trust your own strength or luck too much.

When a prediction fails, we will not admit failure, but seek explanations. This is a psychological effect that is more powerful than superstitious predictions, and is deeply rooted in our psychological defense mechanism. Admitting failure is painful. At most, you can admit that you are unlucky, but if you say that you are not capable, that is absolutely not possible. If you go out and do a questionnaire survey, more than half of the people will feel that their appearance is above average, which in itself violates the definition of average. When the market changes unexpectedly, all kinds of true and false news are flying around. What is particularly interesting is that when the market rises, most of the news flying around is good news; when the market falls, most of the news flying around is bad news. It is not that the good news or bad news has really become more or less, but that people's psychology urgently needs an explanation, and more importantly, a comfort.

So we can see that no matter what the predictions are beforehand, the explanations afterwards are omnipotent and can "solve" all problems. If everyone is bullish, the stock price will rise. The explanation is the reflexive effect caused by strong consensus. If everyone is bullish, the stock price will fall. The explanation is that all the bullish investors have entered the market, and there is no incremental capital, so the stock price will inevitably fall. If good news comes out, the stock price will rise. This is called the realization of good news. If good news comes out, the stock price will fall. This is called the exhaustion of good news. If everyone is bearish, the stock price will rise. This is called the inevitable rebound of bulls who are oppressed to the extreme. If everyone is bearish, the stock price will fall. This is called the self-realization of the market. If bad news comes out, the stock price will rise. This is called the exhaustion of bad news. If bad news comes out, the stock price will fall. This is called the realization of bad news.

Stop looking for predictions and explanations. These things will only make you restless, add to your troubles, and waste your precious time and energy. Invest your limited time and energy into learning and work. Improve your cognition, broaden your horizons, and enhance your abilities, especially your ability to make money off the market. Stick to regular investments, add to your positions when the market falls, hold your coins for a long time, and be as firm as a mountain. All good things will come unexpectedly.