Bitcoin speculations; what are they, and why is the majority of the market just that?
These two questions are asked almost as much as the question; when will BTC return to the peak of December 2017, or will it never get there again?
While I am not going to focus on the peak, and when/if it ever gets there again, I would like to spend some time on the idea that crypto markets are mainly speculation. However, the first thing that I need to explain is what bitcoin speculation actually is.
There seems to be some confusion with some people about how something as big as cryptocurrency is only based on that word that seems like a dreaded off-put to newcomers.
What are Bitcoin Speculations?
- 1 What are Bitcoin Speculations?
- 2 The Problem with Speculation
- 3 How to Speculate on Your Own - Without The Need For Google
- 4 Crypto Robots
- 5 What is a Crypto Bot?
- 6 How do “Speculation Bots” Work?
- 7 Algorithm Creation
- 8 Strategy Allocation
- 9 Execution
- 10 Human Evaluation
- 11 What Are The Differences Between Crypto Bots and Humans?
- 12 Conclusion
- 13 Steve
The easiest way to explain what Bitcoin speculation is is to quote a dictionary explanation of the word:
Engagement in business transactions involving considerable risk but offering the chance of large gains, especially trading in commodities, stocks, etc., in the hope of profit from changes in the market price.
Basically, BTC speculation is a personal thought, based on information, thoughts, or a mixture of the two, of how the market will act in any given timeframe. There are different ways in which that is completed, though.
If you look a little further down the page, you will see a graph of how the price goes up and down, a lot. That price is changed through speculative interest; the more people who are interested in it as a speculative possibility of earning money, the more it is worth, the more money you will make.
The Problem with Speculation
Now, the problem with speculative views on things such as market prices is that they are as individual as you like your pizza. If you are unsure what I mean by that, check out our article on time analysis. All you have to do is search the term “bitcoin speculations” and you will get: About 2,320,000 results, of people telling you what is going to happen. Now, the results change from article to article. Some will tell you that the price is set for an all-time peak of $75k within weeks, due to a 700% Bull Run. Others say Bitcoin prices slip amid speculation that a block of the cryptocurrency possibly linked to creator Satoshi Nakamoto just changed hands.
Both of those articles were published in the last three weeks, and that is only two views out of that 2million+ articles.
So, what if we look at the articles only updated in the last 24 hours? Maybe that will give us more of an insight into what may happen.
The first thing that I noticed is that we instantly see 15 pages of results in Google, about what might happen. Even with a disclaimer at the end of the page stating:
In order to show you the most relevant results, we have omitted some entries very similar to the 149 already displayed.
If you like, you can repeat the search with the omitted results included.
The second thing that I noticed is that you get results contemplating a $100k price on 1 BTC. Now, that result does look like a meta description set for a search tag on the site, probably as clickbait, but you get the idea.
How to Speculate on Your Own - Without The Need For Google
There are many ways to peel an eggplant, so to speak. but two of the most common ways that people do it are:
Knowing which is the best way is as uncertain as anything else in the crypto world, unfortunately. There are many arguments for both sides, though. We will take a quick look through both of the options so that you have a better idea of what suits you best, and then you can use them to see what gives you the best gain.
For those of you who have never heard of a crypto robot, they are simple (in terms of explanation) but not so simple in execution.
The great thing about being a trader is that you have the ability to buy low - sell high. The volatility of the market is the problem, especially when you can only see the current value of the asset you are buying and not future prices.
Imagine a world where you could look at a graph like this when you are only halfway into it, or better still you are at the beginning:
You would wait till mid-2015, put all of your money into BTC, and sell it all in December 2017, right?
The reality of that though, is that Bitcoin, and most other cryptocurrencies, would fail to get past the first few years, and they would crash into a heap. The much more unfortunate position that we are all in is that we are all at the leading edge of the graph, waiting, hoping, that the price will do whatever it is that we want.
What is a Crypto Bot?
The goal of all trading bots is to generate profit. In the most basic term, a crypto bot is a computer program that “knows” when the market is at a low point and buys, then sells at a high point, all autonomously.
The problem with the bots is that many coders can create a bot that will buy and sell crypto, but the goal is to make money, not just buy and sell.
Now, we know there is one problem with many bots, the fact that they have to generate a profit. However, there is another, more complex problem that some bots can do, while most cannot. That is risk-adjusted profit. Risk-adjusted gains are the part of crypto bots that are easy to explain but difficult to execute. Take a look at the two examples below, and see which you would prefer:
- Guaranteed 1% increase ROI per day for 1 year, giving you a total ROI of 365%.
- Possible 600% increase per year, but with the possibility of losing everything in a single day.
While some “risk takers” may prefer the idea of a possible 600% increase, most people would, or should, take the guarantee of 365%. However, that guarantee is the hardest part of creating a bot for cryptocurrency speculation.
How do “Speculation Bots” Work?
There are three main components in a crypto bot that you need to understand. There are, of course, more things that go into the planning, design, and creation of each, but the basic principles are the same:
- Algorithm Creation
- Strategy Allocation
This stage is the “prediction” part of the bot. It is where data is added to the bot for it to decide when and where to put your money. Collected data determines whether a buy or sell signal comes out of the other side.
The allocation stage uses the created algorithm and decides how much to buy or sell, and where. It can be as a portion of your capital, or all of it.
Execution is the visible part of the bot. Using the algorithm and strategy, the execution places the money in the right place at the right time. Well, that is the idea, but not all of them do this properly.
As I have already said, not all bots are profitable; unfortunately, some are more than others. When many people have the same bot, or they are using the same service, then you need to keep an eye on the communication between them. That is because it is easy to get disjointed bots which all do different actions at different times. When that happens, you will see that the outcome of the results will be unfavorable for every user. Therefore, sometimes, human evaluation is better.
Human evaluation can be vastly different from a bot. That is because there are often emotions in human thought processes. However, the process of human evaluation needs to follow very closely to the same rules of a bot. The issue is that you need to work out all of the information yourself, instead of letting a computer program do it for you.
You need to look at historical data, trends, strategies, etc. and then you need to apply the buy/sell process yourself.
What Are The Differences Between Crypto Bots and Humans?
Providing you find a good bot, there are some very significant, and advantageous differences to using a bot. The main differences are:
- Continuity. - Robots can run 24/7/365. People need to sleep, have time away from a computer, take time for family, and other commitments.
- Reaction time. - The human brain is 10 million times slower than a computer. That is not taking into account things such as decision making and procrastination.
- Emotions. - A computer does not have emotions to get in the way of decision making. It only sees money as a numeral, not an asset. Therefore, it will do what it does, with no thought about personal circumstances or emotions.
- Capacity. - Much like speed, but we, as humans can only think about a few things at once. However, a computer can do multiple tasks simultaneously.
The most significant difference in terms of making the choice between doing your own bitcoin speculations and using a computer, though, is a pretty simple, yet hugely important one. That is, the bot is only ever as good as the person who developed it. That means that you will only ever make money, or lose it, based on their algorithm, planning, and execution. You are effectively leaving your money in the hands of another person, or people.
There are so many bitcoin speculations on search engines that you can easily make the wrong decision if you use them. However, what are your choices? The only thing that you can do is to do them yourself or find a very good bot to do them for you.
Personally, I think that the best way to do it is to learn how to speculate with some degree of accuracy, and then look for a bot that is similar in style to your own methodology. Alternatively, if accurate speculation is difficult for you, which it is likely to be, (it is for everyone), is to look at reviews and guides about how to use them, and which perform the best.