Today's post will be interesting - I promise you that much

Whether you will like what I tell you is another matter entirely. I doubt that you will. In fact, I'm going to pop a little additional warning in right here:

If you are easily offended, then you had better stop reading this right now. This could hit a nerve or two. I'm a straight talker with hardly any tact. You have been warned.

Because right now you've already read the title of this post. You're already thinking: "that doesn't apply to me, I am realistic, I know what I'm doing."

No. You're wrong. It does apply to you, you aren't realistic and you don't really know what you're doing.

As usual, I don't like to throw out statements without backing them up. Standby for the backup:

I'm REALISTIC about the crypto market. You aren't.

If you look at the description under my name, you'll see that it says "realistic". You probably didn't even notice it. You took it for granted. Most people are realistic. You're realistic. Realistic isn't important.

Dead wrong.

I'm very proud of my realism. It's something that took me most of my life to develop. It is the product of decades of self improvement and the conscious removal of my natural biases. But this is not a post about me, it's about you.

I hate optimists

Let's be fair, replace "hate" with "intensely dislike". You probably don't understand this. You probably think I'm just being grumpy. But that's because you're not a realist.

Imagine you work with Connie. Every day Connie walks into the office and says that she is going to pick up a $100 bill lying on the ground as she leaves the office that afternoon. She never has before, she never does, and she probably never will. But she says it every day, in fact, she insists on it. Don't try to argue with her, she won't believe you.

To a realist, the world is filled with Connies. Almost everyone is a Connie. Optimistic, won't listen, almost always wrong.

Frustratingly infuriating. Now you know why I'm grumpy.

I'm making this up

I'm talking rubbish. My analogy with Connie was silly. People are rational.

Wrong, wrong and wrong again.

Without delving into the depths of psychology, I want to give you a two minute introduction to some basic psychological concepts that are rather important.

We like to think of ourselves as rational creatures. We watch our backs, weigh the odds, pack an umbrella. But both neuroscience and social science suggest that we are more optimistic than realistic. On average, we expect things to turn out better than they wind up being. People hugely underestimate their chances of getting divorced, losing their job or being diagnosed with cancer; expect their children to be extraordinarily gifted; envision themselves achieving more than their peers; and overestimate their likely life span (sometimes by 20 years or more).
The belief that the future will be much better than the past and present is known as the optimism bias. It abides in every race, region and socioeconomic bracket.
From http://content.time.com/time/health/article/0,8599,2074067,00.html

That's you they're talking about. You have an Optimism bias. And you probably never even knew it. https://en.wikipedia.org/wiki/Optimism_bias Sadly, that's not the only bias that you have:

Psychology has traditionally assumed that generally accurate self-perceptions are essential to good mental health. This was challenged by a 1988 paper by Taylor and Brown, who argued that mentally healthy individuals typically manifest three cognitive illusions—illusory superiority, illusion of control, and optimism bias.
From https://en.wikipedia.org/wiki/Illusory_superiority

Sorry to break it to you, but chances are that you have 'Illusory Superiority' and 'Illusion of Control' too. In simple terms: you overestimate your capabilities and your ability to control your circumstances.

Why believe me? I'm just spouting random psychobabble aren't I? Alright then, see if this sounds about right:

Svenson (1981) surveyed 161 students in Sweden and the United States, asking them to compare their driving skills and safety to other people. For driving skills, 93% of the U.S. sample and 69% of the Swedish sample put themselves in the top 50%; for safety, 88% of the U.S. and 77% of the Swedish put themselves in the top 50%.
From https://en.wikipedia.org/wiki/Illusory_superiority

Can you see the problem now? But still, that's other people, that can't be you can it? So then I ask you: have you voted lately? Because if you have, then you are probably suffering from an illusion of control. Yes, you, and the whole long line of people that stood there voting with you.

Oops, I just rocked your world and blew the illusion of democracy wide open. Sorry, optimists, THAT'S reality. Or perhaps I'm wrong, in which case, feel free to conduct an experiment next time your country has to elect a president: cast your vote for anyone who is not at the front of the race and see how far that gets you...

Don't worry, I'm sure your vote counts. You can make a difference. That's what you've been telling yourself for years isn't it?

The illusion of control is the tendency for people to overestimate their ability to control events
From https://en.wikipedia.org/wiki/Illusion_of_control

Now I'm CLEARLY talking nonsense! I can't be right! Democracy is not the illusion of controlling the masses by giving them the perception of control through participation, yet still controlling the outcome by using media to manipulate the sentiment of the general population. Is it? Oops, I just let the cat out of the bag again. I probably took that a bit too far. You're not quite ready for it yet. Forget that for now, we will return to herd mentality later.

So crazy Bit Brain has lost the plot. He thinks democracy doesn't work. He has a few good points about biases, but they don't apply to me. I know this because I can see the biases in other people. I don't have those biases.

Right?

The bias blind spot is the cognitive bias of recognizing the impact of biases on the judgment of others, while failing to see the impact of biases on one's own judgment. ... ...The bias blind spot is named after the visual blind spot. Most people appear to exhibit the bias blind spot. In a sample of more than 600 residents of the United States, more than 85% believed they were less biased than the average American.
https://en.wikipedia.org/wiki/Bias_blind_spot

If you're an American reading this, then there is only a 15% chance that you have a realistic perception of your biases. Even if you are in that 15%, it doesn't mean that you're unbiased, just that you don't think you're unbiased.

Why is this a problem, and what does it have to do with crypto?

Made by @bitbrain. Original image from https://coinmarketcap.com

Yes. I just blamed you for the major crypto market crash of 2018.

Why did I do that?

Market psychology 101: a market does whatever people expect it to do.

That is the absolute truth. Ask any economist worth his or her mettle. If people expect e.g. the gold price to go up, they will buy gold. The price will rise because it is being bought, and the expectation becomes a self-fulfilling prophecy. If people see the price rise too high, they get scared and start selling off some gold. The price starts dropping, more people scare and sell, the price crashes. The price does what the market expects it to do.

That's exactly what happened to the crypto market in late 2017/early 2018.

People became over-optimistic about the market. Optimism caused the hype spike. Prices shot up.

Here is the worst thing about being an optimist: optimists are only ever disappointed. If you are always expecting a best-case scenario, how can you ever be pleasantly surprised? What you can be is bitterly disappointed!

A disappointed person can quickly become disillusioned and feel a little lost. When their perfect world breaks, they need to seek a new reality, a more realistic one. What do optimists do then? They turn to pessimism! "Bitcoin is dead!" (Seen that headline before?), "Crypto is over", "The regulations are going to close down the exchanges". Yeah, yeah, sure guys, whatever you say. BUT, while this is going on, the market goes into an elegant swan dive. People sell, prices crash, more people sell, prices crash further. Sell, crash, sell, crash, sell.

But Bit Brain! What kind of idiot would hold their crypto when it loses 75% of its value? That's just stupid!

Absolutely. I agree.

BUT (you knew that was coming, didn't you?) when it was at the top, you didn't know that it was going to lose 75% of it's value, did you? Back in December, you though the world was a lovely rosy place. Crypto was flying along and you were making a killing. But something changed. Someone became doubtful. Someone sold. And then someone else. And someone else. And here is where it becomes your fault again:

Because when the market dropped 10% you didn't have to sell, but you did, and you were not alone. Maybe it wasn't 10%, perhaps it was 20% or 40% or 70%, it doesn't matter. If at any time the selling had stopped then the market would have immediately stabilised. When people stop selling, then prices stop dropping. Simple, you already knew that. Why didn't the crash stop at 20% or 40%? Because of you. Because you saw it going lower. Because you posted on twitter - "the market is in a hype cycle, here comes the bear market, big correction under way #getoutofcrypto #hellotether". You kept it going. You fed the beast. You sold. You caused the crash. $600 billion of it. Because your optimistic bubble burst and you lost faith in the market.

Bit Brain isn't the crazy one

D.Y.O.R. Do Your Own Research. You've seen it 100 times. You've ignored it too. 30 seconds of reading on coinmarketcap is not research. Nor is "guys I'm gonna buy ONT, is it a good time?" on Facebook.

When I do research, I dig deep. I put a lot of effort into researching a coin, same as I do for my blog posts, only more so. This is especially true if I do not know the coin at all, or if it is a new coin (an ICO). The result is this: once I have bought a coin, I WANT that coin! Yes, I take quite a few risks and buy a few wild-cards too, but most of my long holds are very well researched.

That makes my life simple. CNN can broadcast tonight that NEO is banned worldwide. Binance can delist it. Da Hongfei can be imprisoned for fraud and SKY news can report that all NEO nodes are defective. It would not matter to me in the least. I would not sell. I believe in NEO because I have spent not hours, but days researching it. I am fully confident in it and I know a lot about it. If it drops 10%, I'll hold. If it drops 25%, I'll hold. If it drops 75%, I'll still hold. And I have held. I'm not a day trader. I don't have the time to swing short-term profits. I select potentially good coins for long-term holding, it's my main strategy. When markets crash, I don't care, I know that that's just the disheartened optimists selling. I just wait.

In the long-term the markets will rise again. I'll get my investment back. I'm not relying on the opinions of anyone else. I'm not going to get scared if the market takes a dive. I'm not going to panic when everyone else does. I'm not going to sell. I am confident in my rational and realistic decisions to buy the coins that I did.

What you did was to follow the herd. They panicked, and you panicked with them. You were optimism biased and reality caught up with you. You all ran around figuratively waving your arms in the air. You fed off one another's panic. You sold. You crashed the market.

What now - help me Bit Brain

Don't be a sheep! Make your own decisions. Stick to them. Don't follow the herd! Critical thinking is one of the most valuable, yet least practised skills on this Earth. That is the reason why some people insist that the Moon landings were faked or that aircraft flying over them are spraying chemicals on them. Severe lack of critical thinking. Don't be like them. Learn things, empower yourself. Don't be lazy - read!

And now, finally, I'm going to throw you a bone.

This post does not apply to everyone. I'm playing a percentage game here, I'm generalising. NO! That is not your get-out-of-jail-free card! Chances are that it does apply to you! There are realistic people in this world, just far fewer than you think. It's hard to be realistic, you get a "negative" or "pessimistic" stigma attached to you (because the vast majority are optimists). It's actually depressing to be realistic, it's like you want to see the world for what it is, but everyone else wants to insist that nothing is ever wrong.

Tip: Next time you want a realistic opinion, go find that depressed person you know, buy them a coffee, and ask them what they think:

Depressive realism is the hypothesis... ...that depressed individuals make more realistic inferences than do non-depressed individuals. Although depressed individuals are thought to have a negative cognitive bias that results in recurrent, negative automatic thoughts, maladaptive behaviours, and dysfunctional world beliefs, depressive realism argues not only that this negativity may reflect a more accurate appraisal of the world but also that non-depressed individuals' appraisals are positively biased.
https://en.wikipedia.org/wiki/Depressive_realism

I hope that helps you a little, and I hope that it provides a silver lining to any of those suffering from depression who may be reading this.

Here's the really funny part

I'm really bullish about crypto. This isn't optimism, it's REALISM based bullishness. If you want to know why then read some of my other posts. The "Bitcoin price predictions - chart display" three part series probably explains it best. This link is to Part 3 - it contains links to the first two parts: https://steemit.com/cryptocurrency/@bitbrain/bitcoin-price-predictions-chart-display-part-3-the-s-curve-more-good-news

In a bear market I look far more optimistic than most. Yet my view doesn't change when the market swings. It's not me that's changing, it's you.

Conclusion

I know that most of this post consists of bold statements. (Look at my description again - it also says "opinionated"). I can not realistically expect you to believe or agree with everything I say. As usual, DYOR 😉. I just hope that this has planted a seed or two in your mind. This is not just something I came up with now, it is an area of interest of mine that I have been observing for some time. As far as I am concerned, what I have written here is true and correct.

This post was not actually to chastise you, it was to wake you up, make you think, and show you the unfiltered reality that I perceive. I hope that I have achieved that.

As a matter of interest: No, I don't vote. There are various reasons. I don't trust politicians, I don't believe that democracy really places power in the hands of the people, I certainly don't believe that one vote counts (run the numbers, I dare you - see what percentage of the vote is yours). If you live in a principality or small island state this may be different for you, but my view holds true in most democracies.

Final thought

I mentioned depression, and I would be remiss not to take this opportunity to highlight the plight of people suffering from it. Mental problems are very real, and all the more painful to the sufferers because they have no immediately visible effects. If you have depression then I strongly recommend seeking professional help. I lost a friend to it about a year ago, and I would not like to see anyone go through that sort of suffering. If you know anyone suffering from depression, please be kind to them. People suffer in different ways, everyone can use a kind word or small good deed.

Yours in crypto,
Bit Brain

Further interesting reading: The Dunning-Kruger effect. I would have included it here, but this post is long enough and I have to sleep sometime! https://en.wikipedia.org/wiki/Dunning–Kruger_effect

From https://www.validatum.com/articles/pricing-and-the-dunning-kruger-effect

DISCLAIMER:
I am neither a financial advisor nor a professional trader/investor. This is not financial advice, investment advice or trading advice. Unless otherwise stated, all my posts are my opinion and nothing more. Crypto is highly volatile and you can easily lose everything in crypto. You invest at your own risk! Information I post may be erroneous or construed as being misleading. I will not be held responsible for anything which is incorrect, missing, out-of-date or fabricated. Any information you use is done so at your own risk. Always Do Your Own Research (DYOR) and realise that you and you alone are responsible for your crypto portfolio and whatever happens to it.