The rise of the crypto industry over the past years has captured everyone’s attention and has gotten people thinking and wondering about what might come next for these controversial assets. There’s a growing number of traders and investors with funds tied up in crypto, and they all want to know what to expect so they can make more informed decisions and boost their returns. Therefore, trying to predict the future price performance of different cryptocurrencies has become a common practice nowadays. Everyone from simple crypto enthusiasts to versed financial experts contribute their two cents and try their hand at anticipating upcoming trends.
However, opinions on this topic vary widely, with some foreseeing further growth and others pushing forward gloomy narratives of dramatic decline. So, where does the truth lie? Unfortunately for all those involved in this endless attempt, most predictions fall short of reality and turn out to be highly unreliable.
It’s certainly easier to come up with more truthful estimations in the case of more established assets like Bitcoin and Ethereum that have a longer history behind them if we can even say that about digital currencies. But when it comes to newer coins like Render, it almost feels like shooting arrows in the dark. Making an accurate Render price prediction is as much a matter of chance as it is of research.
It’s not an issue of projected values perfectly matching reality. No one expects this level of precision to be possible, but sometimes prognoses are so far off that it makes one question every prediction they come across. This puzzling situation calls for a more in-depth exploration of the reasons why predicting crypto prices and performance is so difficult, despite analysts’ best efforts and intentions.
A nascent industry
Compared to conventional assets which have been around for decades or even centuries, the existence of digital currencies in the form we know them today stretches over a very short period of time. Their journey began only 15 years ago, with the birth of Bitcoin. How is this related to prediction accuracy? It all comes down to the fact that we don’t know much about crypto and don’t have enough historical data on which to base our projections.
Not enough time has passed to collect sufficient information and observe clear patterns and cycles that could give us an insight into how digital assets might react in different circumstances. In the absence of reliable indicators to guide predictions, one can only speculate based on what we’ve seen in the few years we’ve been keeping track of crypto movements.
With long-established assets, the wisdom drawn from the lessons of the past can serve as a guiding light, but with crypto, the data scarcity doesn’t offer strong fundamentals to conduct a proper analysis and come up with potential scenarios.
Raging volatility
Another direct consequence of market immaturity is extreme volatility. Although all markets experience regular cycles of rise and decline, assets that are still in their early stages of development like crypto are far more unstable and thus bound to suffer from sudden and sharp price fluctuations.
Bitcoin’s price history offers the most relevant examples in this respect: in June 2011 the coin crashed by 99%, in April 2013 we saw an 83% drop, and during the last crypto winter, it fell by 16% in a single week. But we also witnessed the original crypto jump in price numerous times over its existence, going from $13 at the beginning of 2013 to over $100 by April and above $200 by October. These are just a few instances of how rapidly digital assets can appreciate or depreciate, with no prior warning.
The future is unclear and things can change at any moment, so this volatility renders analysts’ research rather useless since none of them are able to look into a crypto ball and foresee these unexpected changes.
A multitude of influencing factors
It was once believed that because they are built atop blockchain technology and can do away with intermediaries and circumvent centralized controls, Bitcoin and the altcoins were also immune to external factors. That myth has long been debunked. First of all, governments have renounced their neutral stance and are actively interfering in the crypto market given their growing acceptance in mainstream finance. Many countries around the world have developed and introduced legal provisions to clarify the status and regulate the use of digital currencies in their jurisdictions.
But even if cryptocurrencies were free of government and regulators’ interference, there are still many other events and elements that affect their value. It’s important to understand that although cryptocurrencies reside in the virtual realm exclusively, they don’t exist in a bubble. On the contrary, they are tied to a wide range of internal and external factors, which makes it virtually impossible to keep track of all the variables affecting their trajectory and foresee the changes they might bring on. These include the project’s structure and utility, supply and demand in the market, social media narratives, competing cryptocurrencies, and economic conditions.
Furthermore, political announcements and events can also trigger significant price swings. Bitcoin’s appreciation in the lead-up to the US presidential elections and the following period provides the most relevant example of how crypto is impacted by what’s happening on the world stage.
Final thoughts
The experience we’ve had with crypto since their emergence proves they’re a tough nut to crack when it comes to making forecasts. Does this mean we should stop checking or trusting crypto predictions altogether? Not exactly. Traders and investors need to stay on top of key indicators to see which way the wind is blowing and take into account different potential scenarios. However, one should take these narratives with a grain of salt and realize there is no guarantee that the projections put forward by analysts will come true. Maintaining realistic expectations and being ready for the unexpected is the soundest approach when dealing with crypto.
