Bitcoin ‘experts’ are often clueless

On Dec. 22, after Bitcoin began what has now become a 65% crash, analyst Tom Lee put out a note telling people to buy the dip:

Fundstrat’s Tom Lee says he’s a buyer of the bitcoin pullback, now sees more than 35% gains from here

“Here” was 5000 points ago.

But then he doubled down (1/9/2018):

Bitcoin could ‘easily double’ in 2018, says Fundstrat’s Tom Lee’ (cnbc is so dumb they couldn’t even get his name correct in the title)

What do you do when you’re in a hole? You keep digging. So he doubled down again (2/2/2018):

As bitcoin gets cut in half and continues to dive, Wall Street’s Tom Lee remains bullish

It’s bad enough habitually being wrong, but its worse then you’re supposed to be an expert and you get even the fundamentals wrong. Tom Lee despite being an analyst does not understand how a futures market works:

Lee is also taking some cues from the bitcoin futures market. Contracts for coming months are pointing to higher prices, or “contango,” Lee pointed out, which will encourage investors to hold bitcoin and sell the futures contract. That’s in contrast to the negative sign of “backwardation” in the last few weeks, in which futures contracts for three months out pointed to a drop in bitcoin prices, Lee said.

But I do. The presence of contango or backwardation in a futures market has nothing to with sentiment and is of no predictive power. Contango and backwardation arises due to variables such as interest rates, cost of carry, dividends, and how much friction is in the market. Here you can see there is no contango for Bitcoin futures: the future price 72 days out is the same as the current price and 9-day (click to enlarge):

Why is there no contango? Because Bitcoin has no cost of carry, being that it is digital. It has no friction, meaning that transactions occur instantly and anyone can own Bitcoin at any time by buying it on an exchange at the spot price. Contango and backwardation occurs when there are storage costs or the commodity cannot be owned (such as spot volatility).

Just another example of people who are held up as experts being wrong.

Analysis such as Tom Lee can spout off bad advice without facing the consequences of being wrong. As long as he keeps his jobs, he’s not going to lose money, but his clients will.

People who read this blog would not have been mislead, as Tom Lee’s followers obviously were. If you look at the chart, Bitcoin has been in a restlessness downtrend for the past 2 weeks. For a bounce to be truly the bottom, it has to be in excess of 3000 points and be sustained for a week, but the recent bounces have only been 1000 points and brief. Until that happens, it will keep falling.

As long as these pitchmen are paid to be wrong and give bad advice to their followers, people such as myself and others will patiently debunk them.