Hybrid Intelligence and uncertainty
Over the last few weeks, the crypto community had been actively preparing for the upcoming Bitcoin fork. Funds were transferred from the “alts” and ETH en masse to Bitcoin. BTC/USDT reached $7,800 at the peak.
Suddenly, news about SegWit2x “being postponed” came in. There will be no fork in the near future. Buy walls began to collapse and the BTC price at the moment is $6903.35 according to the Сoinmarketcap.
This story tells us that the cryptomarket is very unstable and very immature. It also indicates that the uncertainty level on this market is extremely high. These are all common truths, obviously.
What happened was a typical Nassim Taleb black swan, which are recurring guests in traditional financial markets, but for cryptomarkets, they are more likely to be permanent visitors.
A black swan is an unexpected event that was not predicted by analysts. It breaks the market’s trends and patterns due to its irregularity. A black swan can cause damage. For example, it just caused damage to those bullish on BTC and vice versa. However, it can bring significant benefits, as it delivered to those who were shorting BTC.
Can we predict black swans? The exact timing of such an event is probably unpredictable, but that it is going to happen sometime soon can be foretold with certainty. We all remember The Big Short movie (based on the real story): a few groups of financial analysts predicted the upcoming bursting of the housing bubble independently of each other. Neither group was right about the exact time of the crash, but the essence of their predictions was true and the housing bubble burst in 2008 — to the surprise of mainstream analysts who ignored the reality and thus, were caught off-guard.
Cindicator’s Hybrid Intelligence is not only accurate with its prediction of prices that fit into one standard deviation. We are creating a cluster of specialized analysts, “swan hunters,” analysts who are especially good at identifying and predicting upcoming black swan events. Enhanced by the AI, their forecasts can be extremely useful for regularly catching black swans. Cindicator analysts don’t need to be concerned about their reputation since voting is anonymous and we don’t fine people for making incorrect predictions. In this system, everyone can be Michael Burry (one of the first to identify the subprime mortgage crisis; his logic and actions were questioned by his investors) but without risking losing face or being fired.
Black swans are not that hard to spot. How many professionals engaged in crypto-trading understand that the current ICO market is overvalued? Things that are possible here, like the asset growth of 346,242% (NXT record high), are unnatural to say the least. We tend to believe that more people realize this than who openly admit it.
Cindicator lets analysts utilize their professional expertise without any risk on their side. Furthermore, their analytics is then processed by our ML algorithms, which can distinguish valuable opinions from random votes.
There is real power in our Hybrid Intelligence. The SegWit2x cancellation proved it again.
We did not ask directly whether the fork would be cancelled — but we believe that in the future, when our community can ask questions themselves, such enquires will be common.
We asked our analysts some questions regarding the upcoming fork. Their forecasts helped us to make the right decision:
“Another new coin, SegWit2x, is expected to be released in mid-November as a result of the Bitcoin hard fork. Will this update drive the BTC/USD price up to $10,000 by November 25?”
“Will this update drive the BTC/USD price down to $5,000 by November 25?”
Based on the answers tor those two questions, we saw that Hybrid Intelligence evaluated the downside effect for the BTC price higher than the upside one. The probability of the BTC price dropping to $5,000 was assessed as 37%, while the likelihood of the price increasing to $10,000 was reported as 23%. We got another valuable insight from asking these questions: Hybrid Intelligence saw both extremities as unlikely.
A few hours before the fork cancellation, we asked the following:
“The cryptocurrency Bitcoin (BTC/USDT) breached the $7,500 level for the second time at the Poloniex exchange on Wednesday, November 8, after the total market cap for all cryptocurrencies topped $200B for the first time. Will BTC/USDT rise above $8,500 by November 25?”
Hybrid Intelligence did not expect BTC to grow to $8,500 in the following two weeks.
Shortly after the news about the fork cancellation, we asked the following question:
“Mike Belshe, one of the leaders of the SegWit2x project, announced by email that they are suspending their plans for the upcoming Bitcoin hard fork. In your opinion, will BTC/USDT drop below $6,000 by November 20?”
The answers to this question helped us to calculate the exit target. Hybrid Intelligence attributed a low probability for this event: 32%. While BTC may still drop to $6,000 by this date, the low likelihood suggested that this decrease will be slow. Therefore, we were able to close our position at the right time.
Our traders, who are currently testing Hybrid Intelligence in the field, were able to make a successful short trade and received 15.6% profit (5.2% with 3x leverage) in less than 1 hour during the fork cancellation events.
