One pattern you would observe in the tight-knit cryptocurrency community of the late 2010s is that price action of individual coins was highly reflexive.
There were many triggers a token’s price might have reacted to. A tweet from an influencer about intransparent token economics. A global news headline. The price of Ethereum or Bitcoin going down. Sometimes, even the price of the coin itself increasing or decreasing was taken as a signal.
Whatever the cause, once a direction was established, the word would spread like wildfire, mostly on Twitter. Like dominoes, people would sell or add to their positions, drastically stretching the price further in the current direction. Sometimes, a few hours later, news to the opposing end would come to light, and the cycle could revert as quickly as it had gone the other direction.
This always seemed silly to me, and, often, it was. The crowd’s price pulse was way too sensitive. Every minor development was blown out of proportion before it was even interpreted, let alone interpreted correctly. But the reflexivity still had a strong impact on prices and, in some cases, even killed projects altogether.
Almost a decade later, it feels like the internet has truly hit global real-time status, and this same unreflected reflexivity is now everywhere. The president of the United States makes a post, and the oil price decreases by $10. An influencer rants about her ex, and a lynch mob knocks at his door the same evening. The new movie trailer drops on Youtube, and before the film is out, people have already review-bombed it down to one star out of ten.
It is such a great power we hold, the ability to instantly disseminate information, and yet, by and large, we’re wasting it on dumb shit. We’re creating momentum in all the wrong directions, almost as if collectively hypnotized, and by the time the crowd wakes up, everyone wonders: Why did we care about this so intensely again?
Reflexivity can make a real difference. When a country’s leadership has oppressed the people long enough, and protests arise, it’s critical enough people join at the same time. When a terrorist group or natural disaster creates real danger across a wide area, we must get as many to safety as we can. But these situations are far and few between, and, often, actually mere tipping points after long deliberation. It takes a lot of corruption for a people to march against its regime, and it takes a seasoned expert to recognize a catastrophe in the making.
95 out of 100 times, unreflected reflexivity is just that: joining the crowd without thinking. And it’s not just us turning off our brains. We’re encoding this behavior into our machines and algorithms, too. Gold traders can’t sell within seconds of the latest headline dropping. But high-frequency trading programs can. Social media platforms boost popular posts first, then verify their accuracy later, if at all. And since AI is built on probabilities, it usually tells us exactly what we want to hear.
In many ways, it was better for the world when news traveled more slowly—because most news aren’t newsworthy at all. They’re nothing-burgers which, by the time the mail carriage crossed into the third state, had fizzled out completely. Relevant information, meanwhile, went through countless layers of filtering before it reached the masses. Its essence had been distilled, its veracity established.
When every idea can reach everyone in hours, it’s easy to default into “What should we do here?” The real question, meanwhile, is “Should we do something here?” Most of the time, the answer is “No,” and that has always been—and will continue to be—a perfectly valid response.
Watch out for unreflected reflexivity.
