Bitcoin by Ross #7: How to Read the News

by Ross Ulbricht

I wasn’t expecting to write again so soon because there have been no significant price changes yet that affect our analysis from the previous post. However, I found the reaction by the news media to “Bitcoin by Ross” to be interesting because it illustrates a point I brought up here. In that post, I said the following:

Many look to the news to get an idea of why prices have been going up or down and to find the reasons for why they’ll be higher or lower in the future. This is counter productive because the news is caught up in the same cycles as investors, so you’ll see good news and rosy projections at price peaks, with bad news and projections near lows.

The reaction from the news to “Bitcoin by Ross” was overwhelmingly positive and optimistic. However, I was very careful to point out in my posts that the optimistic forecast was just one possibility, and even it calls for just one more relatively small advance in prices before transitioning to a massive bear market. Here’s what I said at the end of my last post:

Whether we are in it now (our second scenario), or there is one more stab into new highs with wave (5) (our first scenario), wave II will come. As noted, it will likely be accompanied by extreme pessimism and antagonism toward Bitcoin. Long-time hodlers may capitulate and sell out. Businesses and governments may reject it. Some may call it “dead.” But so long as bitcoins are still being traded and the system remains technically sound, the end of wave II could be the best buying opportunity we will see for a very long time, perhaps ever again.

By all accounts, this is a very pessimistic outlook for the medium term. I put forth some ideas in that same post about wave II taking prices as low as $1,500. Yet nearly all of the news coverage was about the possibility of an advance to ~$100,000. For example:

“Silk Road founder Ross Ulbricht makes $100k Bitcoin price prediction”

“Silk Road Darknet Marketplace Founder: BTC Will Reach $100,000 in 2020”

“Bitcoin Set to Shatter $100K in 2020, Says Ross Ulbricht”

Because the news is caught up in the same cycles of optimism and pessimism as everyone else, taking it at face value will only draw you into those cycles as well. A better way to see the news is as an indicator of current levels of optimism and pessimism. The fact that coverage of “Bitcoin by Ross” has been so optimistic tells us we are closer to a peak in prices than we are to a low, and there is more downside than upside potential.

This does not rule out the $100,000 scenario. That may be the peak we are close to. $100,000 is only 5x more than the all-time high of ~$20,000. Bitcoin has seen multiple price advances on the order of 500x (as noted here), so a price of $100,000 is not as dramatic as it seems.

But the optimistic reaction from the news should make us more cautious and give a little more weight to the pessimistic scenario from our previous posts: that the price may fall below the recent low of $3,200 before it rises above the $20,000 peak.