Despite the recent downturn in the cryptocurrency market, there is still a multitude of news articles on cryptocurrencies. These articles range from exposés by financial media companies to blogs of armchair speculators.
Because the quality of articles differs considerably, we should be discerning with what we read regardless of the source.
High-quality articles can valuable in keeping us updated about the technological advancement of blockchain projects, future business use cases and financial regulations from governing bodies.
Low-quality articles on cryptocurrencies are like junk food. Reading them is comparable to eating empty calories. At best, we waste time and get an entertaining hit of dopamine. At worse, the misinformation takes a toll on our financial health.
Some recurring themes in cryptocurrency articles to avoid reading are:
Theme 1: Price predictions
We see a lot of price predictions for cryptocurrencies. Common predictions appear in the form of:
Bitcoin will reach 50 000 USD by the end of 2018
The reason there are so many predictions is that it is an easy way to gain eyeballs on the articles. It feeds off the dream of getting rich fast and easy.
For those speculating in cryptocurrencies, reading predictions allow them to validate their actions. They will seek out articles that reinforce what they want to believe.
Illustration by Bruce Flow
The thing with the internet is that basically anyone can call themselves an expert and publish a prediction. There are no gatekeepers to check the credibility of authors.
Some of these predictions are backed by “technical analysis” charts. Lines and triangles are supposed to make the numbers more believable.
Just like the stock market, it is incredibly hard to make accurate predictions.
Companies like Bridgewater Associates spend hundreds of millions every year on predictive algorithms and hire highly intelligent people to increase their chances of being right in investment predictions.
What makes us think some guy in his mom’s basement with a YouTube channel can make accurate predictions? He might get lucky. You know what they say: a broken clock is right twice a day.
If a person could accurately predict price changes, there is no reason to release the information. More realistic reasons to publish predictions are:
- to gain web traffic
- pump and dump schemes
Be skeptical when you come across market predictions. Do not seek them out just to validate what you desperately want to believe.
Theme 2: Crypto celebrity quotes
Another common theme in cryptocurrency articles are quotes from crypto celebrities. Readers are frequently drawn to those articles because of the famous name in the title.
Such articles usually chronicle a famous person who has made hundreds of millions from cryptocurrency. Common headliners include the likes of Michael Novogratz or the Winklevoss twins.
Many are influenced by such articles to make cryptocurrency speculation decisions. When a crypto celebrity says something like “Cryptocurrency will be a 20 Trillion Dollar market”, the quote is reposted with euphoria in Reddit threads.
Crypto celebrities like Michael Novogratz play in an entirely different league. They have access to early information from having connections to tech companies and investment firms. They have the resources to hire highly intelligent analysts to make very informed decisions.
It is futile to make investment decisions based on a single crypto celebrity quote without knowing the bigger picture behind what the celebrity is doing.
The power that crypto celebrities wield is undeniable. As of today, John McAfee has more than 800 000 Twitter followers. He has revealed that he charges $105 000 per promotional cryptocurrency tweet. Let that sink in.
It is might be interesting to hear what crypto celebrities have to say, we just have to be careful about what we do with the information.
Theme 3: Price change justifications
Cryptocurrency prices are very volatile compared to other markets such as stocks, real estate or metal commodities. Price movements of 20% a day are fairly common.
Many websites try to profit from volatility by offering opinions on why the price has risen or fallen. Common price justifications include policy changes by the government, technological updates or market rumors in Asia.
Just like the stock market, the cryptocurrency market is driven by human emotion and is not always based on intrinsic value.
Illustration by Bruce Flow
There is no real way to know if a major price change is caused by a singular event.
In reality, price changes could be triggered by:
- a singular event
- multiple events in a chain or in parallel
- wrong assumptions out of ignorance
- price manipulations
- who knows what else?
Prices rise because people buy out of greed. When the price rises more, people get greedier. Prices drop because people sell out of fear. When the price drops more, people get more fearful.
We should not to so naive as to believe every price justification we read.
Theme 4: False technical facts
A large number of articles written about cryptocurrency come from authors with little or no technical background. Their false assumptions are written as facts in the articles.
One obvious example is describing different blockchain projects as “rivals”. Articles compare prices between different cryptocurrencies such as ETH and XRP as if they are technically equivalent to each other.
The reality is that different blockchain projects are created for different purposes.
The Ethereum project is built as a decentralized blockchain platform to run smart contracts. Smart contracts are distributed applications that are executed with the goal of not having any downtime or being able to be manipulated. Ether(ETH) is the currency to fuel the applications. The more complex an application is, the more ETF is used up.
Ripple Labs Inc. is a company that works on blockchain solutions to transfer funds in real time. One of their solutions is xRapid, which uses XRP to transfer value. In layman terms, the goal is to transfer money faster and cheaper by transferring XRP.
ETH and XRP couldn’t be more different than each other. Yet, they are referred to as “rivals”.
The list of false facts due to the wrong assumptions in crypto articles are endless.
One way to mitigate the risk of consuming false technical facts is to go straight to the official websites of the blockchain projects.
We should consume hard facts to form our own opinions, rather than based on the views and false assumptions of others.
The information we gain by reading will influence the way we feel and how we act. For this reason, we should be aware of the quality of the articles we read, especially on hot topics such as cryptocurrency and blockchain.
“I cannot remember the books I’ve read any more than the meals I have eaten, even so, they have made me.”
? Ralph Waldo Emerson