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What Crypto Investors Can Learn from Billionaire George Soros

The author, Tanzeel Akhtar, is an independent British journalist whose work has been published in The Wall Street Journal, CNBC, The Financial Times,, Forbes, Euromoney, and Citywire.
The recent news that the $26 billion home office of the Soros family is entering the cryptocurrency market has caused many investors to speculate about the impact on the market.

But one of the most famous ideas of this billionaire may even be more important than understanding how his involvement or not affects the market.

Let us first help those who are not familiar with Soros to understand: In the economic and financial field, Soros is known as “the person who defeated the Bank of England.” He earned only one day on September 16, 1992. One billion US dollars. He is an institutional player and even has the ability to go long and short a currency...even if it is a digital currency.

Soros attributed his success in part to his understanding of what he called "reflection theory." Simply put, this theory points out that investors' decisions are not based on reality but on their "perception" of reality.

According to the theory of reflection, there are two kinds of reality, objective and subjective. Soros explained that subjective aspects include things that happen in the mind, and objective aspects are things that happen in external reality.

The reflections tie together any two or more aspects of reality and establish a two-way feedback loop between them. In this way, the behavior of each reality (objective and subjective) will affect the investor's perception and therefore the price. Soros cited the 2008 global financial crisis as an example of this theory.

He believes that the market has always been out of touch with reality. It is far from accurately reflecting all available knowledge, but it almost distorts the view of reality.

Soros wrote:

“The degree of distortion sometimes varies, sometimes it is insignificant, and sometimes it is quite clear. Each bubble has two components: potential trends that are ubiquitous in reality, and a misunderstanding related to this trend. ."
He went on to explain that when there is positive feedback between trends and misunderstandings, "a boom-bust process has started." This is tested by negative feedback along the way. If it is strong enough to withstand these tests, both trends and misunderstandings will be strengthened.

"Almost religious"

So how does his theory apply to the cryptocurrency market? First, we see these feedback loops.

The more people think about Bitcoin, the higher the price, and vice versa. This is what happened at the end of last year: When Bitcoin prices rose, it attracted more users, which further raised the price of Bitcoin and attracted more people.

Assistant professor at the University of Copenhagen and Omri Ross, chief executive of smart contract startup Firmo Network, the cryptocurrency market will also be as prone to irrational prosperity, prejudice or opinionated behavior as other markets.

He said that in addition, the well-known worship zeal in the community also amplifies these influences.

Ross said:

“The proliferation of subcultures and fan groups around various projects has confirmed the reflexivity of economic actors. In the young and turbulent cryptocurrency market, people’s beliefs about the appreciation of prices are almost daily observed. Mention various intrinsic valuation models."
Shane Brett, CEO and co-founder of GECKO Governance, said that another area that is applicable to reflectivity is the first-generation coin distribution (ICO) field. In this area, the development momentum is the driving force for price increase. But it only lasted so long.

Brett said: "However, the recent discussion about compliance, not to mention fraudulent ICO, has caused some investors to retreat. On the contrary, institutional investors are keen to invest in this market, but in the absence of compliance, they are still Observing the state, this contradicts this theory."

No one really knows what Soros's long-term impact on cryptocurrency was. Just a few months ago, he called Bitcoin a bubble at the Davos forum. Things are becoming more interesting.

But we can learn his insights into the relationship between causality and the role of cognitive functions in a new, constantly evolving and turbulent market.

Original: https: // 
Author: Tanzeel Akhtar 
compile: Bitcoingood
Manuscripts (translated): Bitcoingood (http: //

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