Can we use the past to predict the future?
Hello everyone, today I will answer the question: Can we use the past to predict the future?
Like many questions in finance, it is difficult to give a yes or no answer.
On the one hand, yes we can say that in practice and historically we can predict, or at least get a good approximation of the future of an asset by looking at how it has performed in the past.
For example, we can use US returns to predict or anticipate global economic downturns.
However, no, we cannot predict the future with certainty based on the past because, in finance, many counter-examples show that just because it happened in the past does not mean it will happen again in the future.
The question we now ask ourselves is: Is it possible to predict the future bull run using the cycles plotted on the graph?
Many would have liked me to answer this question in the affirmative, but in practice I don't think it is possible to predict the next up-cycle with certainty with the above data. I don't think it is possible for several reasons:
First of all, $BTC and crypto-currencies are a very young market (less than 20 years old), so it is not rigorous with so little data to be assertive about the next bull run.
Secondly we have several counter examples that show that the bearmarket has no clock, so it can last 1 year, 5 years, 10 years ... We do not know and we can not do otherwise.
And last but not least the macroeconomic context. Today we can't say that the financial markets are at their best. We know that
BTCUSD
is highly correlated to the
SP500
or more globally to the stock market. And given the various events that the world is going through at the moment, it is not necessarily the best time for investors to invest in highly risky products.
Conclusion: Yes, in finance we can use the past to predict the future, but this implies some rules that are not, at least for now, compatible with BTC. Bitcoin and all other crypto-currencies do not have the necessary hindsight and power to differentiate themselves from traditional markets. As a result, it is subject to the bear market like many other assets, and cannot escape it alone.
THIS IS NOT INVESTMENT ADVICE.
Written by @maxencechachuat on 12 January 2023.
Hello everyone, today I will answer the question: Can we use the past to predict the future?
Like many questions in finance, it is difficult to give a yes or no answer.
On the one hand, yes we can say that in practice and historically we can predict, or at least get a good approximation of the future of an asset by looking at how it has performed in the past.
For example, we can use US returns to predict or anticipate global economic downturns.
However, no, we cannot predict the future with certainty based on the past because, in finance, many counter-examples show that just because it happened in the past does not mean it will happen again in the future.
The question we now ask ourselves is: Is it possible to predict the future bull run using the cycles plotted on the graph?
Many would have liked me to answer this question in the affirmative, but in practice I don't think it is possible to predict the next up-cycle with certainty with the above data. I don't think it is possible for several reasons:
First of all, $BTC and crypto-currencies are a very young market (less than 20 years old), so it is not rigorous with so little data to be assertive about the next bull run.
Secondly we have several counter examples that show that the bearmarket has no clock, so it can last 1 year, 5 years, 10 years ... We do not know and we can not do otherwise.
And last but not least the macroeconomic context. Today we can't say that the financial markets are at their best. We know that
BTCUSD
is highly correlated to the
SP500
or more globally to the stock market. And given the various events that the world is going through at the moment, it is not necessarily the best time for investors to invest in highly risky products. Conclusion: Yes, in finance we can use the past to predict the future, but this implies some rules that are not, at least for now, compatible with BTC. Bitcoin and all other crypto-currencies do not have the necessary hindsight and power to differentiate themselves from traditional markets. As a result, it is subject to the bear market like many other assets, and cannot escape it alone.
THIS IS NOT INVESTMENT ADVICE.
Written by @maxencechachuat on 12 January 2023.