The Forthcoming #Bitcoin Crash Will Kill The #Trump Demographic

One common feature shared by both groups is distrust of experts

We know that if you voted for Trump, you are more likely to be less intelligent, less educated, poorer and more rural.  I will argue that this leads to a further feature — distrust of experts — which is required to be a supported of either Trump or Bitcoin.  This suggests that when Bitcoin crashes, Trump voters will experience most of the losses.  In this post, I will consider only the distrust of experts feature.

Note that I said “more likely to be []…”  We are talking about two curves here.  It is not certain that you are less intelligent and poorer etc.  It would not be an objection here to say “I have a PhD and I am rich and I voted for Trump.”  To say that would be to commit the Anecdotal Fallacy, which I argued yesterday:

https://timlshort.com/2017/12/17/the-anecdotal-fallacy-and-the-bitcoin-bubble/

— is also a major feature of the Bitcoin bubble.

One of the notable points about Bitcoin is that there are no professional, experienced or institutional investors who have invested in Bitcoin.  (If that changes, we should all become seriously concerned.). Everyone who holds Bitcoin is an inexperienced amateur.  I put this to a Bitcoin enthusiast, and received the following reply.

Mark Cuban invested big into Unikorn. Peter Thiel invested into bitpay which is a wallet company. Mike Novogratz (former president of fortress investments and partner at Goldman Sachs) runs Galaxy Investments (almost exclusively crypto). Tim Draper bought 30,000 btc in 2014.  And Bill Gates: there are no definitive articles on how much BTC he holds but he has plenty of quotes talking about how it’s the future

I will now show why none of that works.

Mark Cuban and Unikorn

The first point to make here is that it is odd to cite Cuban here since he is on record as saying that Bitcoin is a bubble.  The other problem is that Unikoin, the token involved in this ICO, is not Bitcoin.  (I also believe that almost all of the other ICOs are fraudulent, but I would need a lot more space and time to show that.)  Finally, Unikoin will apparently permit sports betting, so while I do not recommend that, it at least has a theoretical source of value.  Bitcoin does not.

Novogratz and Galaxy Investments

Novogratz and Galaxy Investment Partners have invested into the huge and under the radar Worldwide Asset eXchange (WAX).  This is like selling shovels to miners in the Klondike gold rush.  (Reportedly, Trump’s grandfather ran a Klondike brothel.)  Selling shovels is a great business to be in, irrespective of how many of the miners or Bitcoin holders go bust.  So this again is not an example of a major investor holding Bitcoin.

Tim Draper and 30,000 btc

This is the only one of the examples which approaches being serious.  We must take it seriously because Draper reportedly invested serious money: $18m.  And he is actually holding Bitcoin as opposed to backing exchanges.  The caveats though are manifold.  First, he lost 40,000 Bitcoin in the Mt Gox fraud, and the fact that this did not give him pause makes me think he is an esoteric thinker.  Secondly, a lot of his remarks concern enthusiasm “for the technology”.  It is very important to keep a clear distinction between Bitcoin — a Ponzi scheme — and the block chain — a very interesting technology.  Thirdly, this is one man against every investment bank, hedge fund, regulator and all the other expert investors in the world.

I have in fact been told that my 20 year experience of successful investing is a disadvantage, because it means I am unable to understand the “glorious opportunity” allegedly represented by Bitcoin.  There are in fact some advantages to disadvantages, as I argue in my new book:

— but that isn’t one of them.

Bill Gates and the future

This is an excellent example of muddled analysis and poor understanding of the importance of precision and sourcing one’s quotes from reputable sources.  (It is no coincidence that Bitcoin supporters and Trump voters alike disparage proper news sources like the New York Times and prefer websites with manufactured quotes.)  We are not actually given a quote from Gates which is the first problem.  But secondly, it is highly likely that Gates thinks the blockchain is the (part of) the future and is not holding any sizeable numbers of Bitcoin.  A distributed transparent ledger, which is what the blockchain is, is indeed a highly interesting piece of technology which would have many very useful applications.  As just one example, imagine replacing property registers with blockchain.  Myriad opportunities for money laundering and corruption would disappear, and be replaced with an efficient technology. The fact that Bitcoin is also built on the blockchain is irrelevant.

People in this country have had enough of experts

This is actually a quotation from a pro-Brexit politician, but we see the same pattern across the Brexit “debate,” in Trump vs Clinton, in global warming and in MMR Vaccine/autism.  In each case, you need to believe that you are right and anyone educated or with specialist knowledge is wrong.  You also need to believe that those people are lying to you — for no obvious reason.

The quality of the arguments raised by Bitcoin proponents can be seen to be extremely poor.  I discussed here:

https://timlshort.com/2017/09/16/bad-arguments-for-the-permanence-of-bitcoin/

— some really bad arguments.  What is remarkable here though is not the quality of the arguments — they are all very poor — but that this is someone who has somehow managed to publish a book on Bitcoin while clearly not understanding it at all.

So now you can decide.  If you invest in Bitcoin, you are lining up with the people who mistrust experts.  If you voted Trump, you did the same thing, because you are probably a climate change denier.  So I think there is a very strong likelihood that many Trump voters are also holding Bitcoin.  And they are going to pay a heavy price for both decisions.

 

 

Author: Tim Short

I went to Imperial College in 1988 for a BSc(hons) in Physics. I then went back to my hometown, Bristol, for a PhD in Particle Physics. This was written in 1992 on the ZEUS experiment which was located at the HERA accelerator in Hamburg (http://discovery.ucl.ac.uk/1354624/). I spent the next four years as a post-doc in Hamburg. I learned German and developed a fondness for the language and people. I spent a couple of years doing technical sales for a US computer company in Ireland. In 1997, I returned to London to become an investment banker, joining the legendary Principal Finance Group at Nomura. After a spell at Paribas, I moved to Credit Suisse First Boston. I specialized in securitization, leading over €9bn of transactions. My interest in philosophy began in 2006, when I read David Chalmers's "The Conscious Mind." My reaction, apart from fascination, was "he has to be wrong, but I can't see why"! I then became an undergraduate in Philosophy at UCL in 2007. In 2010, I was admitted to graduate school, also at UCL. I wrote my Master's on the topic of "Nietzsche on Memory" (http://discovery.ucl.ac.uk/1421265/). Also during this time, I published a popular article on Sherlock Holmes (http://discovery.ucl.ac.uk/1430371/2/194-1429-1-PB.pdf). I then began work on the Simulation Theory account of Theory of Mind. This led to my second PhD on philosophical aspects of that topic; this was awarded by UCL in March 2016 (http://discovery.ucl.ac.uk/1475972/ -- currently embargoed for copyright reasons). The psychological version of this work formed my book "Simulation Theory". My second book, "The Psychology Of Successful Trading: Behavioural Strategies For Profitability" is in production at Taylor and Francis and will be published in December 2017. It will discuss how cognitive biases affect investment decisions and how knowing this can make us better traders by understanding ourselves and other market participants more fully. I am currently drafting my third book, wherein I will return to more purely academic philosophical psychology, on "Theory of Mind in Abnormal Psychology." Education: I have five degrees, two in physics and three in philosophy. Areas of Research / Professional Expertise: Particle physics, Monte Carlo simulation, Nietzsche (especially psychological topics), phenomenology, Theory of Mind, Simulation Theory Personal Interests: I am a bit of an opera fanatic and I often attend wine tastings. I follow current affairs, especially in their economic aspect. I started as a beginner at the London Piano Institute in August 2015 and passed Grade Two in November 2017!

13 thoughts on “The Forthcoming #Bitcoin Crash Will Kill The #Trump Demographic”

    1. Given that one PhD was in particle physics and the other was in philosophy, you are obviously wrong. A better argument for you, rather than trying to show that a science specialist with a lot of degrees doesn’t know anything about science, might be to actually show that I don’t know anything about science. Point to something I say which is scientifically false.

      The suggestion I read Popper is presumably intended to say something about the falsification of hypotheses. I don’t think I need any further instruction on that.

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      1. And again you make assumptions you think are correct. You also make this error in several other articles. I am sorry but for that I can’t take you in serious. Don’t be offended, but always try to learn of feedback.

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  1. I am not trying to say you don’t know anything about science (assumption). Probably you do know.
    Take the following:
    “”One of the notable points about Bitcoin is that there are no professional, experienced or institutional investors who have invested in Bitcoin.”
    You can’t make an asumption like that. There’s no way you can ever prove this. This is just an example.
    You have a strong opinion about what’s going on in the world. That’s all right, but be aware it will not always be the true.

    By the way I also have a lot of experience as an investment banker for more than 20 years, I also have a fascination for philosophy, so I think we have a lot in common.

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    1. You said precisely that: that I don’t have a clue about science and that I made false assumptions.

      is immediately falsifiable though. All that is required is that someone names a professional investor who is invested in Bitcoin. The fact that no one has done that makes it look likely that it cannot be done. I don’t need it to be a proof in any case. The claim that the overwhelming majority of professionals think Bitcoin is a bubble will suffice

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  2. If bitcoin crash and it probably will , you are still not right. That’s also not the point. But never mind. Busy day tomorrow so good night.

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  3. Why didn’t you just go look up any information about the demographics of Bitcoin users? You’d quickly find that most survey’s show Bitcoin investors lean liberal. Granted they will be self selected samples, but it more than brings your thesis into question. Bitcoin started among tech circles which lean left so it is no surprise.

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    1. That’s a good point. You are the first person to challenge my argument as opposed to say I am an idiot or my two PhDs are valueless. The very rarity of your sort of response tells me that all of the Bitcoin enthusiasts who did send me abuse are distrustful of experts. You are right to think that Silicon Valley leans left. If you have some data I will look at it. I would also expect tech people to be able to tell the difference between “bitcoin is a good investment” and “the blockchain is an interesting technology.” I guess I am more interested in why it is that people can make such a major mistake, whatever their politics. There is also a major strand of the right which thinks the Fed is a conspiracy against the populace, and sees Bitcoin as a way to counter that. This post is one of four on the blog I wrote on the psychology of Bitcoin investors; even if I am wrong on this narrow point, I think we still need to understand the cognitive biases driving this bubble and that is what I propose over the four posts.

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