<blockquote>
<p>How can anyone possibly predict how the price of anything (stocks, Bitcoin, fiat, etc.) will change without “insider knowledge”?</p>
</blockquote>
<p>You can do that by forecasting based on data.  Exact forecasting model will depend on exactly what you want to forecast but most economic variables can be forecasted with a degree of accuracy that is generally higher than just 50/50 random chance (see Elliott &amp; Timmermann 2013 Handbook of Economic Forecasting).</p>
<p>Some series are more difficult to forecast,  for example it is very difficult to beat random walk when forecasting forex exchange rates (<a href="https://www.sciencedirect.com/science/article/abs/pii/S0022199602000600" rel="nofollow noreferrer">Kilian &amp; Taylor 2003</a>), but even in those cases it is not considered impossible only exceedingly difficult.</p>
<p>When it comes to bitcoin forecasting specifically you might want to inquire more about exact models used there at either Quantitative Finance or Bitcoin stack exchange, but just casually search of google scholar reveals plethora of models for forecasting bitcoin returns or trends in Bitcoin prices. For example, <a href="https://www.sciencedirect.com/science/article/pii/S1544612318307918?casa_token=az-2212InI8AAAAA:Ug6NVZ1H5U3W4qZCX-RonfogR1uEhDkdjSp-3R_SGPF3LgMMYMoag9QCWO4thpdRUvnuV357yRM" rel="nofollow noreferrer">Xiaolei et al (2020)</a> report relatively accurate forecasting of Bitcoin value trends with Light Gradient Boosting Machine.</p>
<p>In addition, you would likely want to have not just once forecasting model but multiple ones and analyze their forecasts together.</p>

CC BY-SA 4.0
2021-02-17T10:46:53.817Z
2021-02-17T10:46:53.817Z
1muflon1
<p>Prices are stochastic and cannot be predicted with perfect accuracy. So when you talk about &quot;predicting&quot; prices or price movements, you have to specify what exactly you mean.</p>
<p>Imagine a truly random price that in each month goes UP by \$1 with 90% probability and DOWN by \$9 with 10% probability. (Like a typical stock price that slowly climbs and every now and then sees a major correction.) Your favorite trader on YouTube tries to predict these monthly movements (while matching the overall behavior for credibility reasons) by arbitrarily &quot;predicting&quot; UP on 9 out of 10 months (on average) and DOWN on 1 out of 10 months. Their prediction will be right in <span class="math-container">$0.9*0.9+0.1*0.1=82\%$</span> of all months. This means that of 100 traders using this prediction scheme you can expect to find about 9 having a &quot;perfect&quot; prediction record over a full year. Looks impressive, but is obviously totally useless.</p>
<p>In general, predicting price movements by &quot;noticing patterns&quot; refers to technical analysis. This has a <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/j.1467-6419.2007.00519.x" rel="nofollow noreferrer">weak success record</a> and suffers from a major problem: A trading strategy that is really successful destroys itself as soon as it becomes more widely known.</p>

CC BY-SA 4.0
2021-02-17T13:28:36.670Z
2021-02-17T13:28:36.670Z
VARulle
<p>Other than the fact that all centralized (and thus &quot;quick&quot;) exchanges require KYC/AML nonsense, making it impossible for me to have an account there, I've never dared to even try once to &quot;gamble&quot; or &quot;speculate&quot; on the Bitcoin price. Instead, I've used a decentralized exchange software (Bisq) to simply buy more Bitcoin for fiat money. Never once sold any Bitcoin.</p>
<p>But then I see all these videos of (apparently) intelligent people (but who have very obnoxious personalities) showing advanced visualizations of the Bitcoin (and altcoin) price with tons of &quot;visual aids&quot; that the software adds or, more commonly, they add themselves because they &quot;notice patterns&quot;.</p>
<p>They are always very careful to mention that they are &quot;not giving financial advice&quot; and it's &quot;for entertainment purposes only&quot;. But clearly, that's just some legal disclaimer, and then they go on to mention that you get a $680 bonus if you sign up to this or that exchange with their referral link, &quot;only if you are an experienced trader&quot;. But what kind of &quot;experienced trader&quot; would be watching YouTube videos about trading advice, and not already have an account set up for trading? It seems to make no sense.</p>
<p>Either way, what I'm wondering is how it's possible for these people to predict how the price will go, at least often enough for them to be making huge profits. Which they appear to be doing. I'm not doubting that part. But how can they dare to trust that what they think is going to happen, <em>is</em> going to happen?</p>
<p>I've stared endless hours on Bitcoin price charts and really tried to follow news and watch videos and discussions and think deeply about this in the shower and in the bed, but I just can't make any kind of prediction other than:</p>
<pre><code>I think that it will slowly climb to a million dollars USD per Bitcoin over the next few years, probably with some serious &quot;dips&quot; along the way.
</code></pre>
<p>That's not exactly valuable knowledge. It's not something that I uniquely believe, and it doesn't say anything whatsoever about the short term. It's useless for any kind of &quot;trading strategy&quot;. I have no more fiat money to buy more Bitcoin, so I can just sit here and watch the price climb (and possibly go South by 30-80% at any moment). I do not understand how these people are able to see patterns and have access to information that I don't.</p>
<p>It seems like this German Bitcoin trader often is right about his predictions, because he will make a video saying: &quot;It went eeeeeeeeeeeexactly as predicted, guys! Whaaaaat a time to be alive!&quot;</p>
<p>When I see his dashboard with 32 BTC just in one account/trade, I feel like an ant compared to an elephant. He must have so much BTC to be able to have such a fortune in just one trading account to &quot;waste&quot; (potentially). I have too few Bitcoin to ever dare to &quot;gamble&quot; with them. Because that's what it is: gambling. It's basically closing my eyes and and hoping that the roulette wheel stops on the number/color which I bet on.</p>
<p>Speaking of gambling, I've never been a gambler in general either. I've never had a single debt, because it just feels wrong to me. And I don't dare to get one, because I realize how high the risk is for me losing that money. But at the same time, I'm in serious need of increasing my Bitcoin &quot;fortune&quot;. So I really don't know what to do.</p>
<p>What is the secret behind these people? I doubt that they have gone out of their way to fake it all. I do believe that they are successful, but I don't understand what their &quot;trick&quot; is. Are their brains simply able to see patterns which mine isn't? Have they spent a huge part of their life reading thick books which I'm too tired to even open? I wish I could understand how they can be so confident about the near-future price changes when, to me, it's a complete mystery. I see no patterns whatsoever.</p>

CC BY-SA 4.0
2021-02-17T10:54:53.797Z
you could improve this question by making it more focused, those vignettes are not really necessary for the main question
1muflon1
CC BY-SA 4.0
2021-02-17T11:04:54.923Z
How about outsider knowledge? Different people have different opinions based on the same knowledge. Everyone knows China is slowly overtaking the US, but different people have different opinions about whether that will make Bitcoin prices go up or down. Everyone will try to convince you that their opinion is the right one
Criticize SE actions means ban
<econometrics><finance><stock-market><statistics><bitcoin>
How can anyone possibly predict how the price of anything (stocks, Bitcoin, fiat, etc.) will change without "insider knowledge"?
E. Gilleran
# How can anyone possibly predict how the price of anything (stocks, Bitcoin, fiat, etc.) will change without "insider knowledge"?

(Asked by: username_0 on 2021-02-17)

Other than the fact that all centralized (and thus "quick") exchanges require KYC/AML nonsense, making it impossible for me to have an account there, I've never dared to even try once to "gamble" or "speculate" on the Bitcoin price. Instead, I've used a decentralized exchange software (Bisq) to simply buy more Bitcoin for fiat money. Never once sold any Bitcoin.
But then I see all these videos of (apparently) intelligent people (but who have very obnoxious personalities) showing advanced visualizations of the Bitcoin (and altcoin) price with tons of "visual aids" that the software adds or, more commonly, they add themselves because they "notice patterns".
They are always very careful to mention that they are "not giving financial advice" and it's "for entertainment purposes only". But clearly, that's just some legal disclaimer, and then they go on to mention that you get a $680 bonus if you sign up to this or that exchange with their referral link, "only if you are an experienced trader". But what kind of "experienced trader" would be watching YouTube videos about trading advice, and not already have an account set up for trading? It seems to make no sense.
Either way, what I'm wondering is how it's possible for these people to predict how the price will go, at least often enough for them to be making huge profits. Which they appear to be doing. I'm not doubting that part. But how can they dare to trust that what they think is going to happen, is going to happen?
I've stared endless hours on Bitcoin price charts and really tried to follow news and watch videos and discussions and think deeply about this in the shower and in the bed, but I just can't make any kind of prediction other than:
I think that it will slowly climb to a million dollars USD per Bitcoin over the next few years, probably with some serious "dips" along the way.

That's not exactly valuable knowledge. It's not something that I uniquely believe, and it doesn't say anything whatsoever about the short term. It's useless for any kind of "trading strategy". I have no more fiat money to buy more Bitcoin, so I can just sit here and watch the price climb (and possibly go South by 30-80% at any moment). I do not understand how these people are able to see patterns and have access to information that I don't.
It seems like this German Bitcoin trader often is right about his predictions, because he will make a video saying: "It went eeeeeeeeeeeexactly as predicted, guys! Whaaaaat a time to be alive!"
When I see his dashboard with 32 BTC just in one account/trade, I feel like an ant compared to an elephant. He must have so much BTC to be able to have such a fortune in just one trading account to "waste" (potentially). I have too few Bitcoin to ever dare to "gamble" with them. Because that's what it is: gambling. It's basically closing my eyes and and hoping that the roulette wheel stops on the number/color which I bet on.
Speaking of gambling, I've never been a gambler in general either. I've never had a single debt, because it just feels wrong to me. And I don't dare to get one, because I realize how high the risk is for me losing that money. But at the same time, I'm in serious need of increasing my Bitcoin "fortune". So I really don't know what to do.
What is the secret behind these people? I doubt that they have gone out of their way to fake it all. I do believe that they are successful, but I don't understand what their "trick" is. Are their brains simply able to see patterns which mine isn't? Have they spent a huge part of their life reading thick books which I'm too tired to even open? I wish I could understand how they can be so confident about the near-future price changes when, to me, it's a complete mystery. I see no patterns whatsoever.

**Tags:** econometrics, finance, stock-market, statistics, bitcoin
> **Comments:**
> **username_1**: you could improve this question by making it more focused, those vignettes are not really necessary for the main question  
> **username_2**: How about outsider knowledge? Different people have different opinions based on the same knowledge. Everyone knows China is slowly overtaking the US, but different people have different opinions about whether that will make Bitcoin prices go up or down. Everyone will try to convince you that their opinion is the right one  

---

## 2 answers

### Answer by username_1 on 2021-02-17. Score: 1

> How can anyone possibly predict how the price of anything (stocks, Bitcoin, fiat, etc.) will change without “insider knowledge”?

You can do that by forecasting based on data. Exact forecasting model will depend on exactly what you want to forecast but most economic variables can be forecasted with a degree of accuracy that is generally higher than just 50/50 random chance (see Elliott & Timmermann 2013 Handbook of Economic Forecasting).

Some series are more difficult to forecast, for example it is very difficult to beat random walk when forecasting forex exchange rates ([Kilian & Taylor 2003](https://www.sciencedirect.com/science/article/abs/pii/S0022199602000600)), but even in those cases it is not considered impossible only exceedingly difficult.

When it comes to bitcoin forecasting specifically you might want to inquire more about exact models used there at either Quantitative Finance or Bitcoin stack exchange, but just casually search of google scholar reveals plethora of models for forecasting bitcoin returns or trends in Bitcoin prices. For example, [Xiaolei et al (2020)](https://www.sciencedirect.com/science/article/pii/S1544612318307918?casa_token=az-2212InI8AAAAA:Ug6NVZ1H5U3W4qZCX-RonfogR1uEhDkdjSp-3R_SGPF3LgMMYMoag9QCWO4thpdRUvnuV357yRM) report relatively accurate forecasting of Bitcoin value trends with Light Gradient Boosting Machine.

In addition, you would likely want to have not just once forecasting model but multiple ones and analyze their forecasts together.


---

### Answer by username_3 on 2021-02-17. Score: 0

Prices are stochastic and cannot be predicted with perfect accuracy. So when you talk about "predicting" prices or price movements, you have to specify what exactly you mean.

Imagine a truly random price that in each month goes UP by \$1 with 90% probability and DOWN by \$9 with 10% probability. (Like a typical stock price that slowly climbs and every now and then sees a major correction.) Your favorite trader on YouTube tries to predict these monthly movements (while matching the overall behavior for credibility reasons) by arbitrarily "predicting" UP on 9 out of 10 months (on average) and DOWN on 1 out of 10 months. Their prediction will be right in $0.9\*0.9+0.1\*0.1=82\%$ of all months. This means that of 100 traders using this prediction scheme you can expect to find about 9 having a "perfect" prediction record over a full year. Looks impressive, but is obviously totally useless.

In general, predicting price movements by "noticing patterns" refers to technical analysis. This has a [weak success record](https://onlinelibrary.wiley.com/doi/full/10.1111/j.1467-6419.2007.00519.x) and suffers from a major problem: A trading strategy that is really successful destroys itself as soon as it becomes more widely known.


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