Cryptocurrency investing ...

... gambling with certainty?

Didn't find your answer?

A light-hearted and non-tax topic just for a change ... after reading the following mini-article in last week's New Scientist:

Reddit can predict crypto price changes

"Cryptocurrency traders could have tripled their money by basing their investments on whether the number of posts mentioning a currency on Reddit was greater than the day before.

Emiliano De Cristofaro at the University of California, Riverside, and his colleagues analysed around 130 million posts on 122 forums, or subreddits, about cryptocurrency from between 2005 and 2022.  They also tracked the price of 30 mentioned cryptocurrencies.

There was a correlation for most cryptocurrencies between the level of conversation, compared with the previous day, and price.  In that period, if someone had traded a cryptocurrency based on whether the number of posts rose, they could have made three times more than they invested."

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Is this the equivalent of fixing the tables at Monte Carlo or improving the odds in Las Vegas?

With cheap access to crawler bots, it won't take long for someone to work out that they can 'influence' the price via the social networks (not with convoluted spam invites to defraud the odd punter, but by wholesale smothering that instantly creates a false market that only the insider knows when to enter and when to leave).  Basically its the same as pumping and dumping, but without the need for humans (who are prone to making mistakes and are greedy/expensive - both of which increase risk to the perpetrator).

There's a lot of BIG money (both ultra-rich individuals and major finance institutions) heavily invested in trying to convince the rest of us that crypto is the future.  So just wondered if any of those who have been loudly singing the praises of crypto for the last 2-3 years have any comments on why the market shouldn't be considered as deeply flawed and open to control by a few outside of usual market forces?

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boxfile
By spilly
03rd Feb 2024 23:38

All I can say is that all of my clients who have dabbled in this over the last few years have incurred losses to date.
Some have cashed out, other are sticking with it, but it seems an unreliable investment at best.
If there is the ability to influence it via media posts then surely it should become un-investable? Akin to investing in the outcome of Love Island perhaps!

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By Tax Dragon
04th Feb 2024 06:16

Some correlations are because of a causal connection - the phase of the moon and tides - others are real, but explicable without such a connection - the wolf is always there, but you're more likely to see it when the moon is full - and some are made up - the alignment of the stars with whether I meet someone special today.

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Replying to Tax Dragon:
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By FactChecker
04th Feb 2024 12:31

All of course very true - an intrinsic problem with which data analysts have always had to contend. Hence all the effort that they (or at least professional academics) are supposed to put in to 'cleansing' the data (aka testing for inherent biases within sources and checking for the direction/significance of apparent causality).

I'll admit that I took at face value that such measures had been rigorously applied before even the academics' paper was published, let alone New Scientist became happy to print a mini extract.
But if you want to plough through the full paper, it can be accessed via the arXiv site of Cornell University at https://browse.arxiv.org/abs/2312.08394

BTW I liked your instructive examples - let's hope your partner hasn't read them if you announce tonight that you're going out star-gazing! :=)

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stonks
By WinterDragon
04th Feb 2024 13:10

It's cryptocurrency's worst kept secret. It's all rife with pump and dumps, scammers and fraudsters. There are countless discord servers (zoomer app for chatrooms) dedicated to crypto pump and dumps. Join now to get in early - the irony is the people joining to get in on the profits are actually the victims of the moderators of the server who got in 2 days before posting about the new coin.

FactChecker wrote:

With cheap access to crawler bots, it won't take long for someone to work out that they can 'influence' the price via the social networks (not with convoluted spam invites to defraud the odd punter, but by wholesale smothering that instantly creates a false market that only the insider knows when to enter and when to leave). 

This is already happening but rather than using bots, they just pay celebrities/influencers to do the promotion and scam their own fans. Coffeezilla on YouTube has some great videos uncovering these types of schemes. The most notorious coins I can think of would be SafeMoon or the 'Save the Kids token'. Not to mention the CryptoZoo project headed by Logan Paul.

I was invested in Crypto from as early as 2013 and all I ever did was lose money because I was a teenager that shouldn't have been investing and bought and sold on a whim thinking that's what it was all about. When I a) realised I was an idiot and b) did some actual research; I realised that the projected growth of many coins is reliant on real world use cases being implemented - see El Salvador for how that goes.

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By Postingcomments
05th Feb 2024 14:37

A successful backtest of a strategy doesn't equal certainty going forward.

But yes, anyone who owns Bitcoin seems to have a need to pump it at every opportunity. Almost as though they need to keep the hype going to keep the price up.

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Replying to Postingcomments:
paddle steamer
By DJKL
05th Feb 2024 14:48

Past Performance is....................................

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