I was hit with a little inspiration today when Nathaniel Whittemore shared a couple of New York Times hits that targeted Bitcoin in a recent episode of his podcast, The Breakdown. The first article attempted to dispute Bitcoin’s decentralization by using mining statistics from the early days when very few people were mining. A second article by Paul Krugman attempted to disparage Bitcoin by saying it is essentially useless. This comes from a Nobel laureate in economics notorious for writing an article about the internet as a passing fad. Why do we trust these people, let alone even care what they think?
The difference between signal and noise is simple, but hard to tell in times of panic like today or euphoria when prices turn parabolic. In my eyes, the price in and of itself is noise. The price is made on the edges; Buyers and sellers outnumbered for a short time. It says nothing about network strength or long-term adoption. Price stories are nothing more than attempts to generate clicks by instilling fear or greed based on short-term price movements.
signal, on the other hand, is lower; a peek under the hood, if you will. Stories about the hash rate hitting an all-time high, suggesting the network is more secure than ever. Stories showing unique bitcoin addresses hitting an all-time high, indicating continued growth in users. Stories about a Bank of America survey showing that 90% of Americans plan to invest in Bitcoin over the next year show continued adoption and continued growth. All of these topics have been covered over the past few days, regardless of the price drop. Signal.
Signals about Bitcoin occur every day, but we seem to be inundated with Fear, Uncertainty, and Doubt (FUD) hit pieces and crystal ball technical analysis predictions about the end of the world. I’m here to remind you that most media companies are all about clicks. Clickbait increases engagement, and engagement increases ad revenue. Don’t be fooled by these headlines, there is a signal hidden everywhere and there are many valuable articles that contain much more than meets the eye.
A Miniature Case Study: Benzinga Whale Warnings on June 10, 2022
I noticed a few days ago that Benzinga published two articles within minutes: one about a whale deposit and the other about a whale withdrawal. Bezinga often prices the deposit in US dollars, while the withdrawal is in Bitcoin. The articles are nearly identical for each type of transaction, characterizing bill deposits as a bearish signal while bill withdrawals are described as a prudent long-term holding technique.
“Why It Matters: Cryptocurrency transfers from wallets to exchanges are usually a bearish signal.”
“Why It Matters: Bitcoin ‘whales’ (investors holding $10 million or more in BTC) typically send cryptocurrency from exchanges when they plan to hold their investments for an extended period of time. Storing large amounts of money on an exchange poses an additional risk of theft as exchange wallets are the most desirable target for cryptocurrency hackers.”
Perhaps even more interesting, if you take the time to do the math, you can see as clearly as day that exchange withdrawals far outweigh deposits. In this particular clip by nearly $200,000,000. Nine whole digits. So where is the bearish signal here?
They could have gathered for days or weeks and written a thoughtful article on net whale movements to really delve into the actual signal, but they don’t. Similar to the New York Times, only the headlines and clicks count. They just want the volume.
Technologically driven deflation, Jeff Booth’s thesis, as described in his book The Price of Tomorrow, is happening right before our eyes. The Internet has disintermediated the access and dissemination of information. An advantage for billions, but also a double-edged sword that has severely damaged the financial position of once-large media companies, forcing them to compete for the attention of small publishers like Benzinga.
That’s one of the reasons I like Bitcoin Magazine so much. You have many articles criticizing Bitcoin. They do it all the time, but it’s fundamentally different in the sense that you won’t find it with a flashy headline to drive engagement alone. I see it as a way to drive the network forward: Experts present their case to get in touch with other experts. Not a lightly veiled hit that’s easily disproved or overtly biased. Download the carrot app and Bitcoin Magazine will even pay you to read their articles. value for value; a mutually beneficial transaction. Can you say the same for Benzinga? The New York Times? I couldn’t even access the New York Times articles because they’re hiding behind a paywall. A handy little hurdle to boost the echo chamber.
Finding a real signal despite all this noise seems to be getting harder and harder, especially in this perceived bear market. All I can say is don’t trust the headlines. Especially if they are shocking or sensational. Media companies follow their incentives like everyone else. When the incentive is to get as much engagement as possible, sometimes that juicy headline turns out to be the polar opposite of what was actually written.
This is a guest post by Mickey Koss. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.