, September 27, 2021

Confirmation bias says crypto investing is good for philanthropy


  •   2 min reads
Confirmation bias says crypto investing is good for philanthropy

Confirmation bias is rife among crypto investors; they are now arguing it is even good for philanthropy.

Confirmation bias is where you make up your mind something is true, and then you only see evidence that supports this view. You ignore evidence to the contrary. In such circumstances, the evidence is overwhelming; you must be right.

We are all, susceptible to confirmation bias. All of us are victims. There is an even worse aspect to this bias, in that we are convinced others have it while we're immune. Take two individuals who disagree with each other, teach them about bias. They are likely to become even more convinced they are right because they will say the person they disagree with is ‘obviously riddled with confirmation bias.’ See, Explaining Bargaining Impasse: The Role of Self-Serving Biases

Bitcoin investors are victims of confirmation bias; we know this without a doubt because there has never been an example of group behaviour in history that did not have an element of confirmation bias. But Bitcoin investors can just as accurately say that Bitcoin cynics are riddled with confirmation bias.

Bitcoin bursts, or does it?

Tell-tale signs of this bias include circular arguments and ‘another thing’ type arguments.

A lot of Bitcoin supporters say they are opposed to the way central banks can influence the money suppl. If you respond by saying ‘but a growing economy must have a growing money supply which means you need central banks to have some influence ,’ they will respond with a long list of reasons, but end up saying ‘and another thing, central banks shouldn't have any say over the money say.’

Here is an example of confirmation bias used to justify its price. Recently an idea has been doing the rounds that Bitcoin is a battery. The logic seems to be that Bitcoin mining can occur at times when the energy generated by renewables is plentiful. Take this sentence: “Bitcoin miners perform a socially important function by converting otherwise unusable energy into a global store of value.”

Sorry guys, that make no sense. This is like saying, “what other ideas can we think of to support the Bitcoin narrative?”

A battery stores energy to be used at a later date. If you want to argue that Bitcoin mining isn’t as bad for the environment as some say because it uses energy that wouldn’t otherwise be utilised, that may or may not be a justifiable argument. (The reality, by the way, is that this argument may work in theory but at the moment not in practice.) This is not the same as saying ‘Bitcoin is a battery.’ If you believe in the underlying social good that Bitcoin can do, then, by all means, argue that we can mitigate against the negative by careful application of renewable energy. But don’t say Bitcoin provides a social purpose because it can use energy at times when energy would otherwise be wasted. That is a circular argument.

Now I read that Bitcoin is good for philanthropy.  The argument here is that individuals who have made big bucks from cryptocurrencies are engaging in philanthropy. But that is like saying Ponzi schemes are good for society because winners from such schemes fund good causes.

The Bitcoin is good for philanthropy argument only makes sense if you already believe Bitcoin provides social good.

Taleb describes Bitcoin as a Ponzi scheme, is he right?

That is why cryptocurrency investing is rife with confirmation bias.

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