First things first; we have to define what Dunning-Kruger Effect really is: it is a cognitive bias in which people think they are smarter than they really are, and because they live in this illusion for long - they never admit the reality that they may be lacking.
David Dunning and Justin Kruger described this phenomenon, hence the name.
Some financial pundits are applying the Dunning-Kruger Effect to Bitcoin investors while calling for a 99% crash in its value.
They are doing this primarily comparing Psychology of bitcoin investors to that of Big companies that invest in some internet social media startup thinking it to be the greatest investment ever only to be burnt brutally. Tumblr is their point of reference, which purportedly lost 99% in value.
These pundits are comparing Tumblr and similar social media startup debacles to Bitcoin.
However, their theory may be flawed for many reasons. I will enumerate just a few here:
- Bitcoin is not based on performance of a single person or group but its a collective movement
- Bitcoin is not management driven, its math driven, so you can consider it to be Stupidity Resistant
- Bitcoin’s strength benefits almost all industries unlike most startups that are looking to solve a problem in a specific industry or niche
- Bitcoin doesn’t get paid; external comp factors do not motivate bitcoin and its performance depends on the collective efforts of people connected
- No one has a point of reference to Bitcoin, unlike the other startups which all shared same attributes of hype-marketing-overselling their product
- Most startups only died once and that’s that; Bitcoin on the other hand died 350 times; if something is not dead after dying so many times, it is a fair assumption that it will live on!
We can go on about why Bitcoin is completely different from the traditional social media startups but you get the point.
What other reasons can you think of that makes you a Bitcoin BELIEVER?
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