Bitcoin Self-Mastery Or Self-Delusion?
Our brain plays tricks at times.
Ask yourself.
When was the last time you locked yourself out of your car?
Or locked yourself out of your home?
Back in the day, when I was a Bitcoin Believer, I got so self-absorbed into Bitcoin that I forgot my house keys while travelling abroad.
Only when I arrived at the airport that I realise I had forgotten half of my luggage ...and my passport.
Luckily, my national identity card allowed me to board the plane (this was before Brexit).
Most importantly, when I returned home, I had a locksmith who could open my flat door in only a few seconds.
Every year, people lock themselves out of their houses, leave their keys in their cars—and other harebrained things.
In most situations, we can recover the keys without losing your flat or car.
Can you imagine if that was not the case?
Well, that is what happens with Bitcoin.
Among the 19 million Bitcoins in circulation, as many as 3.7 million have been lost, according to a study by Chainalysis.
“After a couple of changes of computer and an office clear out, the hard drive with private keys to $550m worth of his cryptocurrency is currently somewhere in the town dump. (...) His relationship broke up a while ago, possibly because he couldn’t stop blaming his partner for being the one to actually throw the hard drive away, and he keeps an app on his phone which reminds him in real-time of how much money he doesn’t have.” —Tales of someone who lost his Bitcoin Keys
Considering this in many of the flaws in the Bitcoin system, one may wonder...
” How is Bitcoin changing us?”
Bitcoin’s Decentralised Paranoia
Bitcoin’s mysterious creator may have had a reason for keeping his identity secret.
Many Bitcoin Believers have chosen to keep their identity secret, just as Satoshi Nakamoto has done so.
Why?
A major issue with a completely decentralised system is that no one can trust the other players.
Everyone is by themselves.
You’re better off keeping your Bitcoin private keys — a code that can be written on a piece of paper — hidden beneath your bed just like people used to do with their gold.
Bitcoin’s main advantage over gold is its “portability”, which in plain English means you don’t need to hide it beneath your bed but memorise the private key in your head.
But “portability” is yet another Bitcoin’s false narrative.
Bitcoin Believers, who are highly invested in their “dear crypto,” live anonymous lives so that no kidnapper can get hold of their wealth.
The decentralised system creates the need for each individual to be their own bank.
All the protection and safety delegated to such institutions are now in the hands of the individual in a fully decentralised system.
Any form of delegation away from such Bitcoin decentralisation will permanently corrupt the ethos by which Bitcoin Beliveres breath.
“Secret identities is a big topic in bitcoin communities.You cannot link my Bitcoin address with myself, that is why I’m an invisible man!” —Gigi, Bitcoin Believer
Such delegation of responsibility to a single individual is one step away from becoming totally paranoid about their safety and wealth.
How much peace of mind would you have by living this way?
Decentralisation is a double-edged sword.
Bitcoin’s Addiction
Bitcoin Believers and their self-esteem.
That is one of the most connected things in this world.
When the price of Bitcoin goes up, most Bitcoin Believers think that they will become rich very soon.
And their self-esteem also increases at that moment.
We can’t say that the value of Bitcoin is based on self-esteem, but it has a connection with the self-esteem of a Believer.
Consider the example of Bitcoin’s extreme volatility and its impact on human psychology...
“So what happens if the Bitcoin market volatility is higher than 100%?”
That was a question posed to a Bitcoin Believer promoting Financial Derivatives in Bitcoin.
The answer of that technical person was, “nothing changes because the Black Scholes model still gives a price when the volatility is higher than 100%.”
The answer is short-sighted and reflects a technician’s limited understanding of human behaviour.
The fact is that the higher the volatility, the more the uncertainty.
领英推荐
And the more the uncertainty, the more the trader becomes hyper alerted, hyper prepared to act, triggering a series of physiological changes such as an increase in cortisol and adrenaline.
The impact of market uncertainty on the physiology of a trader is widely researched by John Coates, a former Derivatives Trader at Goldman Sachs who turned into a Neuroscientist in Cambridge.
Technicians are encouraged to read his work before making simplistic assumptions prescribed by mathematical models with a poor link to reality.
Coates writes of the psychological effects experienced by traders operating in conventional markets that can lead to extreme stress, sleepless nights, and potentially depression.
The Bitcoin market is more volatile than most conventional markets, so it is reasonable to assume that psychological effects are also greater.
The impact from high volatility is not necessary solely on Bitcoin Believers.
Even if you are bearish, you may suffer the effects of volatility during a market advance that is in your favour.
“I barely sleep three to four hours a day, which results in me making serious errors in the market. I’ve also started developing pain at the back of my neck and shoulders due to high levels of stress. Crypto will wreck you emotionally and physically. You will get scarred for life.” —Das, Bearish Crypto Trader
Bitcoin’s Stupidity Paradox
While Bitcoin may be old, it is nevertheless more successful than other cryptocurrencies — some of which are technically superior.
Why is that?
It is hard to comprehend how an old operating system with considerable flaws such as Bitcoin has managed to survive in a world of exponential technology.
In a previous newsletter, I’ve mentioned the effect of false narratives that backup Bitcoin.
But I start to believe there is something more profound than that.
Something deeper in the human psyche makes people believe in false narratives.
A possible explanation is the “Stupidity Paradox”.
An effect is not only present in Bitcoin but widely visible in any large conglomerations of people united by a common goal.
The “Stupidity Paradox” is so strong because it is rooted in the happiness of a group as a whole.
People will go to great lengths to be deluded if that delusion makes them happy.
Such effect is highly magnified when operating in a network.
That is mentioned in the book “The Stupidity Paradox”.
A typical example is a system in a large corporation.
“Why in the world would it possibly be that corporations would rather buy tests that don't work than tests that do work? What they do buy is the myers-briggs that sells about a million units a year and the Myers-Briggs has zero predictive utility with regards to performance prediction. So why do people use it? Well, here's one reason; it doesn't hurt anybody's feelings. Everybody wins.” —Jordan Peterson
The “Stupidity Paradox” is widely integrated into old corporate institutions, and nothing prevents the effect from being equally present in new network systems such as Bitcoin.
Collective delusion is a very powerful human behaviour, especially if connected to a sense of false happiness and optimism.
“We've lost sight of the goodness of fortune and we've become much more optimistic. We believe that we are in control of our destinies and with that belief of control comes serious self-esteem problems.” —Alain de Botton
Thank you for reading this newsletter.
Tip of The Week
You might wonder if the “Stupidity Paradox” impacts your professional life.
I coach people who face similar setups, not understanding the ill-designed system’s traps on their careers and how to circumvent them.
What’s more, many of my clients have been deluded from different personal development schools that most times fail people.
“It's very unfortunate that we live in a world full of hope, surrounded by self-help books constantly telling us to get out of bed and achieve wonderful things. if you look at American self-help books, there are really two kinds of books; the first kind is like the Tony Robbins type of book “you can do it, you can make, it's out there”. The other kind of book is about how to cope with low self-esteem. I think there's a real relationship between the two. In a society that tells people that they can achieve anything, we'll also be a society that very swiftly develops a problem of self-esteem. Because simply if everybody expects to achieve everything you're going to get an awful lot of people who are feeling that something's gone dramatically wrong with their lives.” —Alain de Botton
Courage is not measured by mindless behaviours but by facing the harsh truths and dealing with them.
If you want to learn more about how to be a hard realist as opposed to a naive optimist, don’t hesitate to schedule an introduction call here:
Alternatively, feel free to DM for more information.
Nuno Reis
Former Bitcoin believer turned into a Bitcoin sceptic.
Disclaimer: This newsletter does not represent the views of the author’s employer and is not a financial or investment advice.
It intends to be a psychological, philosophical and systemic approach to the Bitcoin phenomenon to elevate the consciousness levels in the finance industry.
The newsletter is about Bitcoin and should not be generalised as views to the wider theme of Blockchain technology.
The writing of this article intends to be gender-neutral.
Quantitative Developer
3 年Delusion. But that won't stop me buying more.