A Real Time Correlation or Causation Question

If there’s one question that seems to confound people who have never traded in the markets (i.e., professionally Day-traded their own assets, or others) it is the question, along with its potential for upheaval, the true understanding of the differences between if something is moving in correlation to something, or, is the causation of the move.

It’s not just traders, business people themselves make the wrong assumption far more often than they dare to contemplate.

The reason for it is simple: Most will not take the time to necessary to do any due diligence as to examining the underlying reasons for why something is moving (i.e. why someone is buying or selling) in the first place.

Most are “bandwagon jumpers.” Although, the vast majority (yes, most) will argue fervently that they are not.

As many know one of my favorite dictum’s is, “Beware when everyone’s on the bandwagon – except the band.”

This lead me to today’s real-time expression and example for those curious enough to want to “play along” as they say, yet be able to do it at arms-length, using today’s most love/hate offering: Bitcoin™, or cryptocurrencies in general.

So let’s get too it.

Here’s the question: Why did Bitcoin, or all crypto’s for that matter, suddenly vault higher?

The news feeds (along with many a mainstream business/financial outlet) have been ablaze with “Up over 50% and more in just the last week!” “Bitcoin to the moon!” And on, and on.

So why this move? Was it in reaction to:

  • A possible safe haven flight of hidden wealth in response to Russian Oligarchs coming under the scrutiny of U.S. banking authorities?
  • A possible safe haven flight of both hidden and visible wealth of Chinese business leaders trying to move money away from the grasp of its politburo?
  • Is the crypto-arena about to be legitimized via government agencies globally?
  • Was the “tax day” sell off truly the reason for the slump and now this is the rebound back to new highs?

I could go on, and on, but make no mistake the above have been just a sampling of the reasons given and conclusions made across many a so-called “informative” mainstream outlet.

But here’s one that no one, and I mean just that – no one – seems to be trying to apply any causation – correlation arguments, or thoughtful investigation into. And it is this:

Was this recent move in the crypto-arena just the result of many early investors just talking-up-their-book beginning with a pre-strike in the media to get-the-ball (or assumptions) rolling, as they say? Then, culminate it all during a conference where the “hot topic” of cryptos was surely to be both talked up, and gobbled up, by those listening, whether they be professional traders looking to put some money into the space as a “lottery ticket” type trade idea? Or, was it professional bandwagon-jumpers actually looking for lottery type riches – and banking on it?

Certainly it could (more towards probable) also be a combination of the two.

Here’s your gauge (aka chart) to both measure, contemplate, what may truly be going on behind the scenes of the entire crypto-arena today. To wit:



To reiterate: As I’ve stated ad nauseam it’s not that I believe there may not be a future in crypto’s per se, I’m just trying to express a point that one can use in real-time, in other areas of their business life. For it’s in the knowing why one thinks about something that’s many times is far more important than being either right or wrong.

You can be wrong about something, as long as you can be truthful with yourself and deconstruct why you were wrong to begin with, along with retrospectively answering the most important question to all of it. e.g., If presented with the same arguments again, would you have concluded the same? And if so, why so?

That’s how you get better. That’s how you grow, That’s how you learn to make better decisions in the future. That’s why the exercise is so important.

Again, it’s possible that all the calls for cryptos to-the-moon tomorrow are correct. There’s nothing to say that they are not. But the real “gain” is in the understanding and the knowledge of why. That’s why this exercise is well worth the risk.

All it takes to play is some honest intellectual investment and contemplation, but the rewards may pay off in greater dividends down the road.

© 2018 Mark St.Cyr