Finding Bitcoin Signal Through Noise


I was struck with a bit of inspiration today when Nathaniel Whittemore covered some New York Times blockbuster articles targeted at bitcoin in a recent episode from his podcast, “The Breakdown”. The First post attempted to challenge Bitcoin’s decentralization using mining statistics from the early days when very few people were mining. A second article by Paul Krugman attempted to denigrate Bitcoin by saying it was essentially useless. The one from a Nobel Prize-winning economist, infamous for an article on the Internet being a passing fad. Why do we trust these people, let alone what they think?

The difference between signal and noise is simple, but hard to see in times of panic like today or euphoria when prices go parabolic. To me, the price itself is noise. The price is made on the margins; buyers and sellers outnumber others for short periods. This tells you nothing about network strength or long-term adoption. Price stories are nothing more than attempts to generate clicks by inspiring fear or greed based on short-term price movements.

The signal, on the other hand, is deeper; a look under the hood, if you will. Stories about the hash rate reaching an all-time high, implying that the network is more secure than ever. Stories showing unique bitcoin addresses hitting all-time high, indicating continued growth in the number of users. Stories from a Bank of America poll indicating 90% of Americans plan to invest in bitcoin in the next year, demonstrating continued adoption and continued growth. All of these topics have been discussed in recent days, regardless of the price drop. Signal.

The signal about Bitcoin happens 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 click-driven. Clickbait drives engagement and engagement drives ad revenue. Don’t let these headlines fool you, there’s a signal lurking everywhere and there are plenty of valuable articles with more than meets the eye.

A Miniature Case Study: Benzinga Whale Alerts June 10, 2022


I noticed a few days ago that within minutes Benzinga had published two articles: one about a whale swap deposit and the other about a whale withdrawal. Bezinga will often price the deposit in US dollars, while keeping the withdrawal in terms of bitcoins. The items are almost identical for each type of transaction and will characterize the exchange deposits as a bearish signal, while describing the trade withdrawals as a prudent long-term holding technique.

“Why it matters: Transfers of cryptocurrency from wallets to exchanges are usually a bearish signal.”


“Why it matters: Bitcoin ‘Whales’ (investors who own $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 sums of money on an exchange presents an additional risk of theft, as exchange wallets are the most sought-after target for cryptocurrency hackers.

Perhaps more interestingly, if you take the time to do the math, you can see as clearly as the day that exchange withdrawals far outweigh deposits. In this particular snippet, nearly $200,000,000. Nine whole digits. So where is the bearish signal here?

They could have huddled together for days or weeks and written a thoughtful article about the net movements of the whales to really dive into the real signal, but they don’t. Because just like the New York Times, the headlines and the clicks are all that matters. They just want the volume.

Technology-induced deflation, the thesis of Jeff Booth as described in his book, “The Price of Tomorrow,” is unfolding before our eyes. The Internet has disintermediated the access and dissemination of information. A boon for billions of people, but also a double-edged sword that has slashed the financial positions of big media companies, forcing them to battle tiny publishers like Benzinga for your attention.

This is one of the reasons I love Bitcoin Magazine so much. They have a lot of 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 move the network forward: experts presenting their cases to develop the conversation with other experts. Not a thinly veiled piece that is easily refuted or blatantly 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 of Benzinga? The New York Times? I couldn’t even access the New York Times articles because they hide behind a paywall. A handy little obstacle to reinforce the echo chamber.

Finding a real signal through all that 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 when they are shocking or sensational. Media companies track their incentives like anyone else. When the incentive is to generate as much engagement as possible, sometimes that juicy headline turns out to be the complete opposite of what was actually written.

This is a guest post by Mickey Koss. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.


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