Cryptocurrency — An Investigation into the World of Paid Strategy Groups
- To investigate and establish the function of a paid group
- How to determine the success of such a group
- To learn how to protect yourself against unjust paid groups and how to find genuine information to assist in developing your technical analysis.
The term “paid group” is used to describe a service provided by a trader within a private group context in exchange for financial recompense. The payment by the customer is typically made monthly or yearly. The concept of a healthy, functioning paid group is in exchange for payment, the trader is providing their time and financial experience to provide market calls for their customer. The idea is that the success rate of these calls along with the correct risk management measures, will make the customer profitable, as well as providing the trader with a steady income. This should be a win-win scenario, right? Well, unfortunately not!
Paid groups in the world of cryptocurrency are perhaps one of the controversial aspects on crypto-related social media platforms.
The advantages of a correctly functioning paid group should include:
A trading strategy is a fixed plan that is designed to achieve a profitable return by going long or short in markets. Good strategies should be consistent, verifiable, quantifiable and objective.
The strategy should set out one’s needs as defined by which assets to trade, entry / exit positions and money management rules. Bad money management will likely render the strategy unprofitable
Educational Information and Guidance
Paid group leaders should have relevant experience in the field that they are providing tuition over. An experienced trader should be able to offer educational information and guidance such as educational videos, portfolio reviews and private coaching sessions. During each process, an experienced paid group leader will be able to describe trading techniques, coin reviews or management on your portfolio holdings and spread. This should be focused on a risk / reward ratio, or in other words maximising your reward while actively minimising risk. A paid group leader will also be able to advise on managing your emotions while trading.
Provide Trading Signals
Leaders will show commitment to helping their team. This can include providing trading opportunities that they have gathered through their own diligent research. This type of information can slip past the gaze of the wider community and thus trade entries can be found. This should also be accompanied with the relevant risk management back up, such as trade, entry and exit positions, as well as stop loss areas in the event a trade doesn’t work out.
Leaders with development experience are also able to create high-level trading bots, that are usually modelled around their tried and tested trading strategy. These will provide alerts to the user based upon the information deemed useful or reliable by the experienced leader.
Provide Largely Unknown Information on Coins
The experienced leader may have contacts in the industry or also be “savvy” on the technical and fundamental aspects of a coin. They may be to source coins with a high yield potential before they have become fully established. This could involve investing in an Initial Coin Offering (ICO), which is typically a very risky strategy. This can be done through creating a pool of the members’ money to collectively invest, though this requires a lot of thought prior to entering.
The negative aspects of substandard or disingenuous paid groups often include:
How do we know what is and isn’t a legitimate paid group? Well the terminology of a group / leader is a good place to start!
Unrealistic terminology can be used across cryptocurrency by “leaders” to increase their significant reach or influence over their followers. Although an example below is not from a paid group, please reference the claim below by “Suppoman” on discussing the average person becoming a millionaire. This is highly divisive language and should trigger alarm bells from the onset. Unrealistic claims are typically followed by unrealistic actions, generally lacklustre or non-existent trading strategies, or lack of risk management.
If you are investing in anything in life, whether it be real estate, business or the stock market, you are always beholden to having done your own due diligence and managed your risk as best as you can. Unrealistic claims should be met with caution, as below example:
False Advertisement and Broken Promises
It is not uncommon to see paid groups making bold, and sometimes outrageous claims, on the benefits that the customer is guaranteed from joining the group. Unsurprisingly, these promises are often not delivered causing negative sentiment towards the “paid leader”. The customer is usually left in a financially inferior position, with the paid leader carrying on their group regardless and simply looking for further customers to replace those that leave.
Also, as part of false advertising, the paid group later will buy followers on social media as a means of deceiving customers into trusting their popularity and image, with a view of gaining their trust of getting in on their finances.
Examples of these will follow in the case study section of the article.
Poor Financial Advice
Paid group leaders who merely provide outlandish price predictions without any substance should be disregarded immediately. This also goes for coin price predictions that are against the market structure or trend. With exclusion of small coin pumps, no coin goes against the market for very long. If you are receiving advice of coins going to go to unrealistic levels whereas the market is going to go in the other direction, you should also know to ignore this information.
Poor financial advice could also constitute anything based on emotion instead of a trading strategy. If the leader is advising their entry to trades because of the way that he feels or thinks, this is a big warning sign to avoid engagement.
A coin will also not outrun the wider market (especially in this bear market) because of its fundamentals. If a leader advises going in heavy because of a partnership, this needs to be assessed on its merits but the likely result is you need to draw back from their guidance. We haven’t achieved mass adoption just yet!
Pump and Dump Groups
In some signal trading groups, “pump and dump” schemes are organised around investing in small market cap coins or tokens. These are reported to the group as being “gems” with an unrealistic rate of return. The coin will be pumped by the group leaders who are often working alongside others who operate similar groups. The group will deem their advice as being just, and invest in the coin as the price is increasing. The disingenuous paid leaders will then unload all of their coins onto the group in a fraudulent manner, financially scamming their members twofold.
A similar scheme is the “pump and hold” scheme. Influencers can be paid by companies to promote buying and holding their coin regardless of the market conditions or the coin fundamentals. The recipient will often be left with negative value on their investment coins after being dumped on at a predetermined time.
Following these schemes, leaders continue to draw in new members and sometimes even change their identity, or rebrand the group and do it all over again. Rinse and repeat as they say!
The awareness of this article was initially raised on “Crypto Twitter” and involved the wider community on how they would like to see the topic being reported. The widespread community got in touch and this involved actual paid group leaders offering a free trial in their group for the benefit of the article (thank you for this).
Others reported that they had felt ripped off and cheated by their paid group leader. This brought a dilemma on what route would be taken to review this article, from the paid group leader’s invite or through the paid group users request. With this in mind I decided to put it out for a vote, with the results being below.
The clear preference from the results was that Eric Choe’s group should be reviewed. A total of 538 people voted and 55% of these voted for Eric’s group. Also, a large section of the comments suggested this preference.
Case Study on Eric Choe’s group
Structure of Group
Eric Choe’s paid group is conducted on the messaging App Slack. The current annual subscription fee is around $1000 — a lot of money for the average person to invest. As such, this analysis of the group should be based on offering value for money and the follow-through on promises made by Eric .
Attraction to Group
Many people have are attracted to Eric’s group due to his known status on “crypto Twitter”. Eric joined Twitter at the peak of the bull run when many new people were also arriving to this space. Most people had little (if any) experience of the cryptocurrency market, and thought that these astronomical gains would go on forever. Eric made some outlandish calls on social media that suggested that he didn’t know any better than the wider community, as below:
The wider audience in social media are far more likely to follow accounts with a large following, as they think this provides legitimacy. While in some cases this can be true, there are also many accounts with a large following that gained these on a deceitful basis; i.e. they have purchased fake followers.
These can be readily accessed and bought through a simple search engine search, with an example provided below.
The cost of buying a following is not very high, and if you are buying a following with the purpose of luring people to a paid group, this initial expense will be far outweighed by the takings of your paid group.
An easy way to check people’s followers is through websites such as Social Blade. These are able to search a variety of social media platforms and reveal statistics such as, the rate of which people are gaining followers. A legitimate account will most likely have a steady follower increase over their account’s lifespan. See a check on Eric’s follower rate below:
Source: Social Blade
You will notice from these results that Eric gained over 100k followers in little over a month. Even with consideration that a large number of people had been brought to the market from the bull run, this colossal number in such a short space of time is most likely to be the result of a large number of purchased followers. If you are realistic in thinking about this, these statistics simply do not stack up when comparing them to other large following social media accounts.
In this case, the actions behind Eric’s following look questionable at best, and deceitful at worst.
Eric also marketed his group would run a thread turning $1000 into $1million, with all results of this put out on his paid group.
Eric started the thread, but it was dropped for whatever reason. This could be construed as a clever, but misleading marketing ploy by Eric to gain followers. It could be that he didn’t have the trading skillset to achieve such a monumental task, (many don’t!). Either way, the lack of follow through for such a bold claim will provide serious scrutiny on your future claims. Bold claims should not be made if they cannot be backed up, otherwise they are misleading. Eric did not back up this bold claim.
This caused members of his paid group to feel cheated in entering into the group, as many joined for this reason, as a below DM received from an unhappy paid group customer:
Verdict = 1/10
Frequency in Group & Community Support
The amount of time spent in the group and the amount of calls made in the group by Eric, was acceptable. Eric is active in his group daily and is also active in the comments section, answering questions of customers or engaging in dialogue with them.
I was satisfied with this element of the paid group. This is an important element to assess as some paid group leaders have taken the customer’s money and subsequently done an exit scam, with no way of customers retrieving their money.
Verdict = 7/10
Call Frequency & Success
The calls in the group were followed largely through the month of February 2019. The market conditions in this time was a continuation of a major downtrend, however there was at least a bullish bounce in many altcoins. No higher highs were made at the time of this article, in particular on the Bitcoin and total market cap charts, therefore this narrative on the market conditions is fair. The frequency of Eric’s calls and activity within the group was acceptable, as previously mentioned.
The success of Eric’s calls was average, which is the level what you would expect most traders to be achieving. Eric made some noticeably successful calls on longing $ETH / $USD and $EOS / $BTC.
During the limited time period assessed, Eric also made some risky calls in uncertain market conditions.
Eric was looking to short $LTC / $BTC on 12th February, after it had received some bullish movement over the previous weeks. $LTC continued to move steadily upwards and consolidate during February, though a retrace was plausible, he was too early on this call.
Eric uses a trading strategy named Wizard in his paid group. My personal opinion is that if you are teaching others with less experience in trading, is that you should teach a “tried and tested” strategy. A plan that can be implemented with a set of guidelines, if these guidelines are invalidated, you do not enter or you leave a trade. This teaches others the skill of both managing risk and eliminating the influence of emotions which are common struggles for those with limited trading experience.
It was noticeable that Eric deviated from his trading strategy a couple of times during the period assessed.
Eric ultimately paid the price from deviating from his own trading strategy. This is something that I would not expect an experienced trader displaying to his customers, as it is showing a lack of risk management. This is something that I would expect from someone with less trading experience than Eric to do.
Eric entered a successful trade on $ETH / $USD in which he got a good, early position prior to a pump. Regardless, he left this trade too early as it pumped again afterward.
It may be viewed by the reader than I am being very critical here, as a profitable trade is often a successful one and no one is perfect. This additional scrutiny is brought about due to price of the membership fee to Eric’s group.
Eric was in a 160k short on Bitcoin, which did not work out. Bitcoin pumped shortly after this and this trade was invalidated. It needs to be considered that although stop losses would have been in place, this trade would have been at a costly loss.
Eric entered a further Bitcoin short on 18th February, this time for 100k. This had similar results to the previous short. Eric also appear confused (from his comments) as to the Bitcoin price action at that time. It is probably best to stay out of trades if the probability of uncertainty is against you.
Verdict = 3/10
Case Study Verdict
Although Eric was active enough in his group, the marketing used to attract members was misleading. It is highly probable that he purchased many of his Twitter followers to appear legitimate. If you combine this with the promise of guiding his group to 1 million USD and the outrageous price predictions that he made on coins, few could argue this is a genuine presentation. This raises the question, why would you invest your $1000 into a source that you cannot completely trust?
Eric was also frequent enough with calls that he made on the group. Although the analysis period for this article was just under a month, the quality of the calls was no better (at best), and mostly worse than free calls that are put out on Twitter. Eric provided exit and entry points as well as stop loss limits, however, some of the calls were based on emotion and I witnessed two large trades that were risky (in my opinion) and ultimately failed. He also went against his trading strategy in calls on occasion, acting upon emotion. I don’t believe as a leader that this sets the right educational approach to the group.
Through the investigation and creation of this article, I personally would not invest in Eric Choe’s paid group and I would advise others against it if I was asked this as an honest question. The level of quality, free information out there in my view is superior to the information in Eric’s group.
Verdict = 3/10
The analysis of paid groups both from a topical and case study perspective depicts the up and downside potential . A working paid group should function like a good business, which produces quality (either by a service or product) for the paying customers.
If you are going to invest in cryptocurrency or participate in paid groups, you need to thoroughly research every decision with as much time and thought as you can. You should not be acting upon your emotions, as this will more than likely lead you to lose out financially.
The volatility and immaturity of the cryptocurrency scene means that there are a lot of “chancers” around, who have calculated the emotive reactions that people have when it comes to investing. The idea of a get rich quick scheme is appealing to inexperienced people, is build on deceptive presentations, and rarely if ever happens to play out as predicted.
It is very difficult to establish the truth such an anonymous and undeveloped space, however by using key elements from this article, it is hoped you have the realisation on what to look out for when making such an important financial decision.
“The pure and simple truth is rarely pure and never simple.” (Oscar Wilde)
Closing Statement by The Author
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