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Cryptocurrency contra Gambling: False equivalence shows correlation but no conclusion

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Cryptocurrency contra Gambling: False equivalence shows Correlation but no Conclusion
Source: Pixabay

High risk. High return. Many investors look at the cryptocurrency realm using this myopic lens. One that looks at decentralized currency as a mere investment vehicle, failing to see the underlying principle of the lack of centralized control.

Cryptocurrencies have been the most volatile financial asset in the past decade, but its loyalists do not regard the rise and fall of Bitcoin’s price to be an indication of its worth. Proponents do not view the coin market in a constant valuation race with the stock market. In fact, they view it as a means to replace the traditional economic system and take back financial control.

When the price of Bitcoin shot up from $500 to almost $20,000, many crypto-newbies ventured into the industry to simply make some money with no underlying belief. The nature and volatility of the cryptocurrency industry has given birth to the presupposition that many investors in the crypto-realm are avid-gamblers. The correlation between the two was studied via a survey by the Centre for Gambling Studies at Rutgers University School of Social Work. However, the survey itself left a lot to be desired as the correlation presented was thin and the conclusion was questionable, to say the least.

THE GAME

Presenting the argument that ‘gambling,’ being correlated with cryptocurrency trading points to a relationship between the two that is thinly constructed, especially when looked at the pool of people considered to be in the gambling fray. The Centre for Gambling Studies denoted people who have engaged in any form of gambling i.e. online betting to in-land casinos at least once a month for a year in the aforementioned category. From a minimal standpoint, considering a relatively small group of 876 adults, with once a month for a year gambling frequency and a wide range of gambling options does not show a habit or an addiction, much less a relationship.

Out of the pool, only 50 percent of the respondents dove into cryptocurrency trading in the past year, with no indication of the quantity or frequency of trades. The study also failed to mention the type of digital assets traded, stablecoins that track their corresponding fiat values do not pose a gambling hazard especially in comparison to low market cap ‘pump and dump’ altcoins. This sliver of a connection between the two also looks very weak, given the significant rise and fall of the global coin market in the past year.

The volatility of the collective cryptocurrency market in 2018 was at an all-time high, attracting risk-savvy and risk-averse investors alike. With the December 2017 crypto-boom serving as an anticipatory mirror of yet another rise, hesitant investors were further buoyed to buy digital assets. Despite this hanging investment carrot, only 50 percent of the avid gamblers invested in the coin market, showing the false equivalency in this correlation.

THE BUY-IN

Devin Mills, the lead author of the study does admit that for “some people,” cryptocurrency trading is an investment opportunity, there is no denying this claim, especially given the growing popularity of the crypto-pegged investment funds that are now mainstream.

He further equates crypto-trading to show people “gamble on horses or sports or slots,” which presents the same medium but fails on the objective. Betting on sports or at the tracks are driven by sheer greed of monetary gains and not value generation. The rush of a full-house is not the same as a coin surging on CoinMarketCap, and does not point to a direct tie between the two.

Furthermore, Gambling sans principle does not derive pleasure from the nature of the underlying asset being risked, it derives pleasure from the asset’s mere change in value. Chance is the only motivator for a gambler, with no skill, effort or study involved; random events result in random rewards, unlike skilled investing.

Drawing the correlation between crypto-trading and gambling was not the intention of the study. It was initially crafted to study the use of virtual currencies as a payment method for online casinos. The study then veered into defining cryptocurrency trading from a narrow gambling lens than through the larger dimension of decentralized currency.

THE CALL

Mills also highlights the culpable infrastructure of crypto-trading that would lust the gambler. Agreed, the crypto-space has made several strides in making trading easier, but if the infrastructure is the argument, nothing is easier than traditional stock market investing.

With end-to-end assistance, a plethora of assets tranches and classes to invest in, stock traders could also be edged closer to the gambling crowd, keeping in mind the similarities between the two fields. The volatility of the stock market is not as dominant as that of virtual currencies, but if the high-risk stocks are analyzed, it does draw an inference to the fluctuations of cryptocurrencies.

Lia Nower, a co-author of the report, attested the same as she drew parallels between high-risk stock investors and crypto-traders, hence debilitating the isolated correlation of cryptocurrency investors to that of gambling.

Furthermore, on studying the responses between the two broad categories of gambling cited by the study, it was found that gambling in casinos draws a negative relationship with crypto-trading and gambling in sports and high-risk stocks draws a positive one. This clear difference in the types of gambling leading to an antithetical trading pattern suggests that the relationship between the two is further blurred.

The study by the Centre for Gambling Studies draws a false equivalence between the two varied concepts, right from their definition of gamblers. As mentioned earlier, the study looked at people who gambled once a month for a year, which denotes on-and-off gamblers, rather than habitual ones. Even with the severity of the sample reduced, just 50 percent of an 876 pool responded to having traded cryptocurrencies, with no further metrics provided and in an enticing year as well.

THE FINAL CALL

Gamblers’ mindset looks at everything as a game of value, of numbers that constantly change and blur the objective from vision. Anything, according to them, can be chanced up and sold for millions, not merely virtual currencies, stocks, commodities, goods, and services anything can be gambled.



Satoshi Nakamoto created the first coin to bypass currency controls, cross geographical borders and push back against controlling governments, with no drive to create an investment vehicle, despite the claims. Cryptocurrencies, even today, are not seen as an asset class but, by many, as a tool for financial freedom.

The equivalence between the two might point to a weak correlation between gambling and any constantly changing asset class, not just cryptocurrencies, but it falls well short of a conclusion.

 





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Bitcoin [BTC] surges above $5,500 and breaks major resistance level; collective market rises

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Bitcoin [BTC] surges above $5,500 breaking major resistance level; collective market surges
Source: Pixabay

Bitcoin [BTC] broke out of its sideways trend that saw coins fall after a brilliant start to April. This “break-out” is especially significant since it came days after the coin was trading sluggishly, pulling the market cap below $175 billion.

After breaking the $5,200 level on April 16, the coin held steady, showing no noticeable dips. However, it also began losing the momentum it had gained when it rose by 15 percent on April 2. Many saw the past week as Bitcoin losing steam, opining that a drop to as low as $4,000 would manifest. This pessimism coupled with the delisting dilemma saw the global market decline by 3.31 percent over the past weekend.

Given this backdrop, the present Bitcoin price incline was even more bullish for the collective market. Further, this was not just an effort to shrug off “sideways bears,” but instead, two key levels were broken in order to usher a collective market rise and sustain BTC bullishness.

Source: Trading View

RESISTANCE

The first, as indicated by eToro’s senior market analyst Mati Greenspan, was the resistance level of $5,350. When Bitcoin began to consolidate following the early April high, Greenspan stated that if the BTC price were to punch above the aforementioned level, it “would likely serve as confirmation that we’re pushing higher and will lead to further buying pressure.”

Greenspan stated that the $5,350 level acted as a major support level throughout 2018. Hence, it is incredibly important that Bitcoin surge above it in the next rise to consolidate buying pressure. Another important point to signal the coming of a bullish market was the 200-day moving average which Bitcoin has stayed above since the April 2 rally.

PSYCHOLOGY

The other significant level for the collective market is Bitcoin’s ascendance over $5,500, which it managed courtesy of this rally. Many, including Greenspan, pegged $5,000 as a key psychological level for the coin and hence, the rise above $5,500 less than three weeks after $5,000 was broken will bring back optimism to the BTC market.



Further, as was seen in the April 2 rise, the Bitcoin pump resulted in the king coin increasing its market dominance. At the close of March, Bitcoin was edging closer to losing the majority. However, the rally saw its share increase to 52.4 percent within a day. Following this recent 4.61 percent increase against the US Dollar, the king coin’s dominance increased to 53.2 percent.

Given the elasticity of the collective market to changes in Bitcoin’s price, the market was awash in green as Bitcoin broke the resistance and psychological levels. Amid this bullish charge, some coins stood out for their above-average gains, which included Bitcoin Cash [BCH], Cardano [ADA], EOS [EOS], Litecoin [LTC], and the exchange-ousted Bitcoin SV [BSV].





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