BitConnect Closes Exchange as States Warn of Unregulated Sales

I know a few people who fell for this, despite my warnings. When you tell someone "these returns are astronomical, teams of PhDs in hedge funds cannot come anywhere close, do you think they're so dumb that they wouldn't put billions in this if it were legitimate" and they reply "yes, I do", there's no helping them.

People love to think they're smarter than those 'experts'. It's a combination of Tall Poppy Syndrome [1] and the Dunning-Kruger Effect [2]

[1] https://en.wikipedia.org/wiki/Tall_poppy_syndrome

[2] https://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect

Exactly. My father is one of such people, and believe me, I've tried everything: I explained him rationally, I talked to him nicely, I showed him examples, I even threatened him -- nothing helped. Finally I gave up, he went bankrupt and only that changed him somewhat (though he still buys lottery tickets in small amounts).

Some people will eventually just want to prove that their freedom to make their own decisions is more powerful than rational arguments, no matter how good.

"You may be right on all points, but it's still my decision to make, you can't do anything about it."

You can add to that that "experts" are pretty clueless as well, 2000 and 2008 are reminders of that. Close to none saw it coming and the ones that did where laughing stock amongst them, you have to be a pretty remarkable person to swim against National bank presidents, government officials and other high ranking people like Alan Greenspan, that was a super respected economist but also has made some of the worst mistakes in history of the world economy and still has power to swing things around I really distrust any finance specialist, but I am also aware that if any high yield information ever reaches me it's either a crime or a scheme to take my money away from me. So it's tricky.

Perhaps then your definition of 'expert' is incorrect? Would it not be that the ones who saw it coming were really the experts? And those who laughed at them were anything but? I would argue that those who laughed at the doomsayers of 2000 & 2008 are the same as those now arguing that BitCoin can only go up. Your reply is a rather odd justification for self-destructive financial behavior.

The difficulty lies not in predicting a crash successfully, but in being able to do so consistently.

At any given time, there is someone who is saying that it’s all about to fall apart. There might even be someone who gets the timing and the reasons right.

The hard part is doing so consistently, and there’s little evidence that anyone can do this, which indicates that luck is the primary factor in various famous “crystal ball” economic predictions.

> Would it not be that the ones who saw it coming were really the experts?

Maybe, maybe not. Without a track record of doing it a whole bunch of times, it's far more likely they made a lucky guess, stumbled into information, etc.

Some are even right but don't get the timing correct. For example, this guy wound up losing everything and owing $106k on a margin call... but if you look at the stock value today he was absolutely correct in shorting it. https://www.marketwatch.com/story/help-my-short-position-got...

> Would it not be that the ones who saw it coming were really the experts?

No, because there are people that predict fiscal doom all the time.

* People predicted that 2016 would have a huge crash.

* People predicted that 2017 would have a huge crash.

* People predicted that 2018 would have a huge crash.

* People will predict that 2019 would have a huge crash.

* People will predict that 2020 would have a huge crash.

If there's a huge crash in 2019, are you sure the people that predicted the 2019 crash are geniuses? Perhaps some of them were simply lucky. You have to be super careful if you are going to go by a small sample of past predictions, because there are a lot of people that make a lot of predictions. Statistically, some of them will make predictions that are correct by random chance.

The fact that you invest in crypto is thinking you are smarter than many well respected experts like Warren Buffet. If you invest in cryptocurrencies (and I do), you are not any more clever than those who bought into BitConnect.

Oh yeah and assuming Warren Buffet et al can literally never be wrong is so much smarter.

The world is not black and white.

No, but ponzi schemes and Crypto are on the same spectrum in terms of traditional financial advisement.

Only up until very recently did Crypto as a whole break away from it, and BitConnect just happens to have its foot in both.

You don't need to be an expert to foresee the collapse of a Ponzi scheme.

Not that the "teams of PhDs in hedge funds" are all that, mind - http://www.aei.org/publication/warren-buffett-wins-1m-bet-ma...

Yes, but I was afraid that saying "even a basket of the 500 top securities can't come close to that, do you think the basket is so dumb that it wouldn't just put its money into BitConnect" wouldn't have the same impact :P

They are probably not as clueless as you think. There's a difference between what they believe and what they say. Try asking any sales professional if buying something they get a 2% commission on is a good idea or not.

Not necessarily true. You should be smarter than the other punters you are intending to sell to, not smarter than Buffett.

It is impossible for people to predict the future perfectly (this is why diversification in investment is so important). "Don't try to time the market" is also generally considered good advise. It's impossible to know exactly when a crash occurs.

That said, it is possible to use market indicators, historical factors, and other numeric qualifications for reasons to be wary, because the investment asset looks too expensive. For instance, up to the 2008 crash, two important indicators -- the price to income ratio, and the price to rent ratio, were very high, indicating real estate was significantly overvalued. The same thing applied to the sky high prices of many .com stocks in 2000, who really didn't have any profit or even cash flow behind it to back the valuation up.

There were plenty of experts raising warning flags on these bubbles. Even from a broader perspective, The Economist was wary of Internet stocks in 1999 (https://www.economist.com/node/183809) and was wary of the housing bubble that caused the 2008 crash in 2005 (http://www.economist.com/node/4079027).

(Of course, The Economist in 1999 used Amazon as the example of an overvalued stock. Whoops. Shows that you "never know". But they wouldn't have been wrong if they had used, say, pets.com.)

No they're not - they are separated by the fact that one's sole purpose is to commit fraud, while the other actually has to do - however much - with technical merit. The however much part exists in every other type of market..there is a subset of people that will always try to game the system of any system they exist within. This is nothing new. That subset can vary in size based on qualities of said market, yes, but the intent of the market is not solely to enable those people.

Saying cryptocurrency only recently broke away from this is just a conclusion of your premise, which I disagree with entirely due to the existence of material like Bitcoin's whitepaper. To say they are on the same spectrum is just misleading.

You completely missed the part of my post where I said "in terms of traditional financial advisement".

Thank you for illustrating the tall poppy thing so well.

Ok. Would you mind clarifying/elaborating on that?

Sure. It's basically the fact that the sentiment regarding crypto in the traditional world of financial advising has been equated to ponzi schemes. The value of the technology hadn't been validated or proven to point where holding BTC had any inherit value beyond what others who wanted the BTC were willing to pay for it. The market pressures weren't real.

However, smart contracts and the adoption of the blockchain by technology's bigger players has provided some validation to what's happening. Regardless of the white papers, and how one individually assessed the thesis, it didn't have market adoption and it wasn't as if BTC was actually producing something. So investing in BTC (a virtual commodity in limited value) had no real business purpose.

So crypto was in the same boat as ponzi schemes, until very recently. Now it's being taken seriously due to providing actual value.

The only thing BTC is really good for right now is to act as an intermediary between it and alts--since you can buy BTC and ETH with fiat, then transfer those to alts. BTC isn't a valid currency for transactions for a variety of reasons. It is simply the backbone of the crypto economy at this point, and the grandfather of the technology--so there's some lure to it as a limited asset that, so long as someone wants it, someone can sell.