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The Great Shill Game: Have You Been Sold?

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How To Spot A Shill In Cryptocurrency

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New York celebrated blockchain this week with a plenty of extravagant parties and exuberant promotions, as the business press has been so delighted to report. But beyond the glitz, there were plenty of clever and innovative applications, like blockchain phones, blockchain cars, and even blockchain vending machines.

Innovation and a lack of regulation, however, do not always make good partners: and for some, unfortunately, the product isn’t a blockchain or an application: the product is You.

So What’s A Shill?

Everyone has their own opinion on what constitutes a shill, and the word is too-readily thrown around in online forums where anyone advocating a position is thus defined.

The word itself conjures up an image of a vast coordinated conspiracy of paid hacks pitching coins like stolen jewelry, but the reality is more prosaic.

“Shills” don’t always tell you to buy something. The great P.T. Barnum used shills to great effect in Ripley’s Museum—instead of paying a fortune for publicity, Barnum simply hired an unemployed man to walk through his door every few minutes. After several hours of entering and re-entering the museum, the place was packed.

Mr. Barnum–who famously observed that suckers appear at sixty-second intervals–would have been a natural at cryptocurrency. If he were alive this week, he would probably be launching an ICO.

The point is not to show that shilling is sinister or sneaky (although it certainly can be) but that it works, and it’s a principle as old as showbiz. Opera houses used to hire spectators to clap or laugh at the appropriate moments: a real-life laugh track.  A game of streetside Monte is incomplete without at least one player who keeps getting very lucky.  Their job isn’t to persuade you to play, because you do that yourself. They’re there to make winning look easy and fun, and act like losing a few hands is no big deal.

Even casinos, one of the most heavily regulated industries in America, make regular use of shills.  The collaborators are given a stack of chips and ordered to play, just so that the other gamblers don’t have to feel alone in losing.

The Nevada Gaming Commission defines a shill as “an employee engaged and financed by the licensee [the casino] as a player for the purpose of starting and/or maintaining a sufficient number of players in a card game” And yes, shills are allowed in poker rooms (but must be identified by the casino upon request). You can spot them a mile off – they’re not allowed to check-raise their pocket Queens.

All of which is par for the course; if you don’t like the rules, don’t play the game. But if you’re reading this site, you’ve probably already got a few chips on the table. With that in mind, here are a few ways to tell which players work for the House.

1. Appeals to Greed

We’re not here to tell you that Bitcoin is a giant pyramid scheme by people trying to take your money. That’s Warren Buffet’s job. 

But we do want to enjoin our readers to avoid thinking with their wallets. While everyone wants to get rich, an argumentum ad pecuniam (a proposition based solely on the notion of making money) is a reliable sign that there’s nothing below the surface. If the biggest reason to buy into a coin is so that you can get rich later, it’s time to run. 

This kind of shilling is more common than you think. When people tell you to “HODL” they’re rarely doing it for your benefit. Even if they’re not being paid, it’s very much an act from self-interest, and the phrase can be roughly translated to something like, “Please don’t sell at current prices, or my net worth will decrease.”

2. Technical “Analysis”

If you’ve been in cryptocurrency long enough, you’ve probably seen a few of those technical charts: the elaborate candlestick projections with Rorschach-like diagrams which show that prices are ready to break out. “Here’s the long-awaited horse-and rider formation, followed by a duck-in-yoga-pants, which indicate that a breakout is imminent.”

One cannot help cringing whenever someone tries to read the tea-leaves of a crypto chart. Real technical analysis—the kind performed by well-paid experts with six-year-degrees—is not the sort of thing one can do on Twitter. It requires months of observation and decades of historical data. A real cup-and-handle formation, for example, takes seven weeks to form, not to mention analyze. This is not an intra-day phenomenon.

There was one time the technical analysis of the majority of serious investors was correct last year, though: that time when all the historical data predicted that Bitcoin would crash, with a few bounces on the way down. It was based on the precedents set by every single bubble ever, and it was also, coincidentally, one time historical data was almost universally ignored in the crypto community.

3. Crypto Influencers

Influence is power, and the world of advertising and marketing has been using paid influencers for years. Cosmetics firms pay millions to YouTube stars who teach impressionable young people how to apply their products.(Return on investment is said to be particularly high in this market.)

YouTube and Twitter are particularly susceptible to this kind of branding, and many crypto projects allot bounties for influencers who shill their coins.

John McAfee (who, by the latest market analysis, is statistically likely to eat his own dick) claims to have tweeted reviews for as much as $105,000. But the shilling goes a level deeper, too: because that price is itself almost certainly an exaggeration. McAfee himself circulated his inflated prices, so that clients could feel like they were getting a good deal when he cuts them to something more ‘affordable’. In a loop of karmic irony, the shill-ers became the shilled.

This isn’t to say that all crypto influencers are shills – John McAfee wears the badge proudly, and has recently been promoting an outright scam, but he’s atypical.

Others provide a genuine service. Reddit, for example, is full of people who simply want to engage more in their community – and if they advocate vociferously for BTC or BCH, for or against hard forks, or even for a particular coin or token, are they shilling… or simply being honest? Are they paid, or just passionate?

And that’s the problem. Understanding someone’s motivations is the key to understanding their actions. Which is why, for example, you will see a disclaimer at the bottom of this post alerting you to the fact that I actively invest in cryptocurrencies and blockchain technologies.

Am I shilling them to you? You’ll have to make up your own mind.

Conclusions

These notes are intended to encourage sober thinking as the crypto market settles its bills from the great rave of November 2017, and wakes up to the Slow Recovery of 2018.

Many of us did well last year–but for each player calculating the odds or counting their cards, there were a few dozen people putting their houses on the roulette wheel.

For those cryptonauts who are ready to party again, it’s worth taking a moment to cogitate on the mistakes and desperate gambles that affected the market last fall, and to be bit more thoughtful about how we gather information and make our decisions this time around.

Disclaimer: The author is invested in several cryptocurrencies and altcoins including Bitcoin and Bitcoin Cash, both of which are mentioned in this article.

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