- Are “crypto bot” ads legit?
- What’s to stop someone from using CRISPR as a bioweapon?
- What happens to SPACs in a market downturn?
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology.
Today, I’ll do my best to answer them.
If you have a question you’d like answered next week, be sure you submit it right here.
If it sounds too good to be true…
Let’s begin with a question on crypto bots:
Good day, I’m a recent subscriber to your Near Future Report publication. Recently, I’ve seen several advertisements for “Cryptobots,” a software program that trades cryptocurrency for you at optimal times, with claims of 2,000% (give or take) gains in 12 months. Can you give us readers a sound explanation of these “Cryptobots” and their claims? Are they too good to be true? P.S. Great publication; the future is the place to be.
– Leo B.
Hi, Leo, and thanks for sending in this question. There is a lot of opportunity within the crypto space, but it’s always good to look skeptically at promises that sound too good to be true.
Regarding the ads you’re seeing, it sounds like they’re describing algorithms that will trade crypto on your behalf. Automated trading strategies are pretty common in both the stock and crypto markets. And their performance can range considerably.
These “bots” can use a number of underlying strategies. Many are as simple as buying a stock or crypto when the 50-day moving average (MA) goes above the 200-day MA, and then selling when the 50-day MA goes below the 200-day MA.
Dollar-cost-averaging bots can also be useful for entering the market, especially for those building large positions over time. And likewise, some people use stop-loss bots to exit positions. Or if you suspect the market will be range-bound for a while, you could consider finding a mean-reversion strategy to deploy for that period. There are many options.
When it comes to bots like this, however, it’s important to consider who is behind them, how long the company or algorithm has been around, and its prior performance.
That’s because these services must have access to your account in order to trade on your behalf. As such, they can potentially cause significant losses. Others may be outright scams.
Another thing to keep in mind is that if a bot is making a large number of trades each day, it will create a tax reporting nightmare at the end of the year.
While I can’t be certain, I’d estimate that the ones you’ve described in those ads are not very good. In fact, a good rule of thumb in the crypto world is to consider any unsolicited ads, marketing, or private messages a scam.
At a much higher level, these bots tend to use specific trading strategies. Some strategies work in certain market conditions, and in other market conditions they are terrible.
To use bots successfully, I believe that the user would need to be well versed in both the trading strategies and what is happening in the markets. You’d have to use that knowledge to employ the right bots at the right time.
Another factor at play is that the best performing bots will not be made available to normal investors. These will typically be developed and managed by hedge funds that have a lot more capital to deploy.
They won’t share those bots because if they have one that is working – which means it is delivering returns that are greater than the market – they’ll keep it for themselves as long as it continues to produce good returns.
Eventually, what happens is that others figure out what is “working” and they adopt the same strategies only to have the opportunity disappear. Because so much of the trading today is automated, and there are so many hedge funds out there, the edge disappears very quickly these days.
This is why I would be very skeptical of the claims that you shared. Many of my investment recommendations and personal investments have gone up thousands of percent, but their rise tends to happen over a few years, not within 12 months – that is far more realistic.
There are many people simply looking to make a quick buck by preying on greed within the crypto space. My senior analyst for Unchained Profits, Andrew Hodges, regularly receives multiple scam offers every day through social media. So I’d urge readers to be cautious and do their homework before using any bot.
With all that said, this is a space that I am interested in. To be clear, I’m not interested in bots that simply employ pre-defined trading strategies. For the reasons that I mentioned above, I believe that their effectiveness over time is questionable.
Where I am spending a lot more time is researching and developing a system that uses advanced artificial intelligence to recognize patterns that normally wouldn’t be spotted. The system has the ability to spot these patterns and produce high-probability signals for specific trades.
This is the kind of edge that I look to develop for my subscribers. This is something that no one else will have – it’s a way to stack the deck in our favor.
In the coming months, I’ll have more to share on this topic. I’ve been in development mode all year. I’m excited to share more details in the near future.
The risk of bioweapons…
Next, a reader wants to know more about the risk of bioweapons:
Hello, Jeff, I just read the following from you: “And that means [IscB enzymes] can fit inside smaller delivery systems such as viral vectors or lipid nanoparticles. The significance here is that these delivery systems are much better about ‘sneaking’ the enzymes to where they need to go in the body. That helps avoid the body’s natural immune system, which is designed to attack any foreign objects detected – even therapies intended to help.”
What is to stop someone from using this method to deliver a bioweapon (i.e., avoiding the body’s immune system)? I enjoy reading emails from you and hope you are well.
– Fraser H.
Hi, Fraser, and thanks for the well wishes. I believe you’re talking about the news I shared at the end of last month about Feng Zhang’s recent study.
As a refresher, Feng Zhang is one of the original inventors of CRISPR genetic editing technology. We’ve talked a lot about this tech in these pages. CRISPR allows us to edit our DNA like software in order to treat and cure genetic diseases.
And in his recent study, Zhang revealed a new realm of enzymes among a family of proteins known as IscB. These enzymes can be used for CRISPR therapies. And as noted in your question, the IscB enzymes are much smaller than the Cas9 ones primarily used up until now.
That means they can avoid the body’s immune system more effectively and treat a new host of diseases that have been out of range. This is incredibly exciting news.
As for its application to bioweapons… there is good news and bad news. Simply put, yes – nefarious actors could potentially misuse this technology. However, this is potentially true of all technology throughout history.
Since CRISPR’s invention, people have been concerned about its potential abuse. That’s because of the wide availability and relatively low cost of the materials required to use CRISPR technology.
And we’ve already seen misuse of CRISPR. As I shared back in 2019, Chinese doctor He Jiankui used CRISPR unethically to edit embryos in an attempt to provide immunity to HIV.
In doing so, however, he also increased their potential mortality rate 21% after age 41. In the time since, he’s faced international censure by the scientific community. He was then found guilty of “illegal medical practices” and sentenced to three years in prison.
Despite the hype surrounding CRISPR’s potential misuse, however, the risk that this technology will be used to create a bioweapon is likely modest. Simply put, there are easier ways to harm large populations.
After all, CRISPR requires an injection of a therapy. As we have seen from the vaccine rollout for COVID-19, it takes a long time to inject a vaccine into several billion people. It’s far more effective and fast to release an airborne pathogen that is highly transmissible.
As we’ve seen with COVID, it can be incredibly difficult – if not impossible – to stop a highly transmissible airborne virus from spreading. A bioweapon would be equally difficult to control and have potentially devastating consequences on a global scale.
And most countries around the world have agreed “never under any circumstances to acquire or retain biological weapons” under the Biological and Toxin Weapons Convention.
While an imperfect guarantee of safety, it turns this issue into a political question rather than a purely technological one. Any nation-state that released a bioweapon would face extraordinary international condemnation.
In short, I believe the incredible potential of CRISPR technology to treat and cure disease far outweighs the risk of it being used as a weapon.
With that said, one of society’s largest challenges will be containing the potential threats from a very small number of nefarious actors, whether it be through the use of bioweapons, cyberattacks, or bleeding-edge technology like artificial intelligence.
Safe investments during economic uncertainty…
Let’s conclude with some questions about how special purpose acquisition corporations (SPACs) will fare in a market crash:
Hi Jeff, I recently read your Bleeding Edge newsletter, “A Market Crash Is Farther Away Than We Think.” You mentioned that we are headed for a major market crash and depression in the long term.
This got me thinking about the special purpose acquisition corporation investments in your Blank Check Speculator model portfolio. Are SPACs recession-proof or immune to major market crashes since the money is held in a trust? In other words, are SPACs safe investments in times of economic uncertainty? As always, thank you for your helpful and informative insights.
– Dustin K.
If we experience a major market downturn, what happens with SPACS? How much should we expect to see in terms of share price? I understand they will retain some for expenses, but what should we expect?
– Barry L.
Hi, Dustin and Barry – I’m answering your questions together since they both deal with how our SPACs will respond during a market crash or downturn. Thank you both for writing in.
As a reminder for new readers, SPACs are essentially holding companies that exist for one purpose: to combine with a private company to take it public. That allows regular investors the rare opportunity to essentially invest in a company before it goes public, which is when the greatest gains are possible.
And the good news is SPACs are a very unique asset class. That’s because our capital is protected. All invested capital is placed in a trust until such a time that it can be used to invest in a busines combination. This framework for SPACs is legally defined in the charter of each and every SPAC. The funds cannot be used for anything else. And that means the underlying capital in the trust is not at risk.
In fact, if the SPAC cannot find an investment target within the typical time frame of 18–24 months, investors get all of their money back, less a small amount deducted due to management fees from the SPAC sponsor. In this way, investing in a SPAC has nearly no downside (very low risk) and fantastic upside. This is what makes SPACs such an interesting asset class.
This doesn’t mean that share prices won’t react during a crash. As we experienced in 2020, investors sold every kind of asset due to irrational fear and panic.
But in the event of a similar drop, SPAC share prices will recover. And if we imagine the scenario where there is an extended market downturn and merger activity dries up, SPACs will simply return all of the capital in their trust accounts.
Before a SPAC affects its business combination, it usually trades near $10 because that’s backed by the amount of money it has in its trust account. That generally puts a bottom floor on the price. It’s rare to see a SPAC trade for less than $9.75, though it does happen every once in a while.
And there are actually trading strategies that some funds use to invest in SPACs that drop below their trust value. It is effectively a way to earn a safe yield in anticipation of the shares returning back to $10, or a complete return of cash in the event the SPAC doesn’t find a business combination. For more conservative investors, this can be a great strategy.
In fact, if we did see SPAC shares drop below this level in a SPAC with great sponsors, I’d see it as an extraordinary buying opportunity for this very reason.
And if any readers would like to learn more about investing alongside us with Blank Check Speculator, you can go right here for all the details.
That’s all we have time for this week. If you have a question for a future mailbag, you can send it to me right here.
Have a good weekend.
Editor, The Bleeding Edge
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