Disclosure: This article is not to promote any coins that John McAfee has endorsed, nor is it to say that any of these coins are bad choices, but instead to discuss the ramifications of blindly taking investment advice from anybody, tech pioneer or not.
the pump
About two weeks ago, McAfee said on twitter that he would start introducing a "coin of the day" and endorse it and explain why it should be bought and owned. He actually started promoting coins before this was official, and in early December "Verge" absolutely sky-rocketed after he talked about it’s advantages.
First of all, to be clear, I have nothing against McAfee. He probably genuinely believes everything he says. In fact, he is not responsible for anybody else’s losses. We could all blame him, but the truth is that McAfee doesn't know where the price of ANY coin is going to go. He is not a financial advisor, trader, or investment Guru, and any wise trader would not make such ridiculous statements OR believe them whether or not they come true. Still, many traders, speculators, and clueless individuals (most people) are simply waiting to see what he endorses so they can jump on the bandwagon and hope for a quick double up.
the herd
Now this is a hard pill to swallow especially when we have seen the confirmation bias success of verge. On his Instagram, McAfee gave a $15 price prediction response to a question. As soon as this was publicized the price of the already pumped Verge doubled again.
When I saw this I thought it was weird that he would make a price prediction that would add another 100 000% increase or so. This would give it a market capitalization close to the equivalent to bitcoin. I decided to keep an eye on Verge. One week later McAfee tweeted that this was not his Instagram account, and that he was hacked. Verge plummeted by 50%. It’s now ranging between 1000 & 2000 Satoshis. McAfee later tweeted that instead of announcing a new ICO everyday, he's going to instead do it on a weekly basis.
So his next announcement will be today Jan 1, 2018 to kick off the new year and if you simply look on youtube you’ll find videos of others “repumping” the pumper, telling you that making money is as simple as buying what McAfee promotes, which is really just a ridiculously dangerous thing to do for any investor.
the truth
To invest and trade optimally you want to be as unemotional and unattached as possible to your trade, and this strategy will mentally turn you into a teenager going through puberty. When your trades don’t work out you’ll be back with a vengeance to buy the next big thing and you’ll probably believe that this has to be the one since the last trade didn’t work out.
Even if these are all good buy recommendations, you will likely have the fear of missing out and will end up buying these trades when everybody is rushing through the door at the same time. As a result you won’t get in at the right price and when you see the price drop by 20-40% you’ll become scared and either double down or sell, perpetuating the emotional roller coaster of doom. The reality is that the McAfee strategy is optimal in turning you into a gambler groveling on the floor.
The key factor here is that you will probably not make the right trades properly, meaning, you will not maximize your return. It’s very easy to think that you’re making the right decisions when you buy something and sell it at a higher price, but if we look at the whole crypto market, virtually any top crypto currency that you would have bought in the past 12 months had a very good chance in giving you a return. It is a widely common cliché amongst the trading community that 90% of traders lose money, while only 10% of traders make money, so are you smart for making money this past year? Probably not.
to conclude
This article has been written to warn you of the potential pitfalls of following the herd, and I highly recommend that if you want to make a solid investment, do your own due diligence, and don’t invest money that you can’t afford to lose. And most importantly, don’t make decisions just because somebody else is doing it. Instead, buy an investment because you genuinely believe in it’s success and because you have analyzed the market and have drawn conclusions from your research, or because you’re following the right persons advice. Investing is an art that requires a lot of time, patience, and discipline, and if done right could reap you great rewards.
Of course, I don't know what will happen in this market, and I hope that we all get rich, but I do know that I won’t be making my investment or trade decisions based on advice from a rock star.
I appreciate you taking the time to read my article and I will be writing more and posting potential buy opportunities in the time to come. I’d like to wish you a meaningful and prosperous 2018. If you liked the article resteem, upvote and follow.
happy new year everyone :)
Posted on Utopian.io - Rewarding Open Source Contributors