HomeCryptoWhy do cryptocurrencies attract novice investors? The authors of “Black Swan” explain.
Why do cryptocurrencies attract novice investors? The authors of “Black Swan” explain.
December 12, 2022
The author feels that the attraction towards cryptocurrencies despite the high probability of losses is due to ‘survival bias.’
Taleb says the industry has failed to produce anything capable of generating cash flow.
Bill Gates believes that the cryptocurrency industry is based on “The Greatest Fool Theory.”
An event that is highly unlikely to occur, or an event that occurs once in a generation, is called a “Black Swan Event” it is considered such as a black swan is rarely seen in the wild. The FTX saga is a black swan event of the cryptocurrency industry. Even though the industry is peppered with similar events, such as the collapse of the Earth ecosystem, the Crypto winter, etc., it still attracts novice investors with the hope of huge profits. But the complexity of the industry causes them to suffer losses.
Modern philosopher, eminent mathematician, former risk manager and best-selling author “The Black Swan: The Impact of the Highly Improbable” Nassim Nicholas Taleb shared some messages for his audience on Twitter, explaining why cryptocurrencies attract novice investors.
Investors usually enter the cryptocurrency world with high expectations, even after so many different opportunities to lose money due to deception, volatility, etc. According to Taleb, it’s a matter of perception. Even after such severe turmoil, if the user is still in the market, there must be an upside to the whole conundrum.
Everything becomes clear when viewed through the lens of “survival bias”. Each survivor has a different perception of the ordeal; some find it encouraging, others suffer from PTSD. Even Nicholas used to praise Bitcoin and cryptocurrencies over banking. Then he turned out to be an industry hater. He recently called BTC a “cancer that has metastasized due to the Disneyland economy in the United States”.
Opinion of the authors on Crypto Industry.
The recent downturn in the industry, according to Taleb, is only due to a lack of cash flow.
The market price of any asset depends on its ability to generate cash flows. And the cryptocurrency industry has failed to produce anything that can generate cash flow. It is circular income in the industry, crypto to crypto.
Bitcoins generate no cash flow or profits for their buyers. They are forced to believe industry speculation, which is not a good business model. When BTC offered low interest, the author said Bitcoin was “a perfect game of suckers.
Bill Gates’ view on the industry.
Even Bill Gates has suggested that cryptocurrencies are 100% based. “The Greatest Fool Theory”.
This interesting theory states: “During a market bubble, money can be made by buying overvalued assets and selling them for a profit later.
It means that, for whatever reason, someone will always be there to pay a higher price for something.
Bitcoin is trading at $17,174.57, up 0.10% in the past 24 hours. At the same time, volume decreased by 29.95% to $12.7 billion.
Nancy J. Allen is a cryptocurrency enthusiast and believes that cryptocurrencies inspire people to be their own banks and move away from traditional systems of monetary exchange. She is also intrigued by blockchain technology and how it works.