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People, on average, lose money trading crypto. This is just a simple mathematical property of the crypto market. On paper, it looks like a lot of people made a
by user-the-name 5y ago
People, on average, lose money trading crypto. This is just a simple mathematical property of the crypto market.
On paper, it looks like a lot of people made a lot of money. But in actual money, on average, you will lose.
- anon9001 5y agoYou've got it exactly backwards, just look at the market cap change over time: https://coinmarketcap.com/charts/ https://coinmarketcap.com/charts/ In a bull market, anyone can make money with just about any bet.
- user-the-name 5y agoThe "market cap" is fiction. It doesn't exist. It's a nonsensical number. What is real is actual money going into and out of markets. And there, on average, people will lose money because no more money is going out than is coming in, and the markets and miners will take their cut as well.
- tick_tock_tick 5y ago> This is just a simple mathematical property of the crypto market. What? I don't doubt that people on average lose money but I don't know of anything fundamental about crypto markets that makes it a mathematical property...
- user-the-name 5y agoCryptocurrency trading is, because of market fees and mining fees, a negative-sum game. That means that on average, you will lose money if you play. Unless you are a miner or run an exchange, of course.
- mrtranscendence 5y agoHelp me out here. I know nothing about cryptocurrency, but as something in limited supply that is exchanged for money it seems that on average people could earn money as long as the price keeps rising. Say there are four people in the crypto market. Joe buys crypto for $50, sells it to Steve for $75, who sells it to Sarah for $100, who sells it to Dale for $125, who holds it. Three people have earned $25 each (minus fees) while one is either even or has lost $125, depending on how you look at it (maybe he's happy holding his crypto permanently). This looks like on average people have earned money. I'm not saying that this reflects how real cryptocurrency markets work, but it seems at least nominally possible that most people have earned money.
- user-the-name 5y agoYou already stated it yourself: He has lost $125, until he sells. That is an average negative. Money in: $50+$75+$100+$125 Money out: $50+$75+$100-3*fees You can continue this chain indefinitely, and the missing final term will get smaller and smaller in relation to the total. The limit of (money out - money in) / transactions goes to simply minus the average cost of the fees. So, a net negative.
- perl4ever 5y ago>He has lost $125, until he sells Everyone who owns an asset is not selling it at this exact moment, so it is worth nothing and there is a 100% loss according to you? This is a possible definition of "loss", but I think it's clearly non-standard, and not useful. You can't just pretend that's what other people mean when they talk about losses.
- user-the-name 5y agoRead the rest of the comment, please. This has no effect on the outcome of the calculation if the trading continues over a longer time.
- lexapro 5y agoHe has "lost" $125 but gained the crypto, which might be worth more than $125 if the market goes up.
- mrtranscendence 5y agoI was responding to the proposition that people will, on average, lose money trading crypto. I guess it depends on what you're averaging over, but I took it to mean people, not money, and in that interpretation people could on average earn money.
- user-the-name 5y agoThe average of the sum of money gained or lost by each individual person is negative. Whether a larger number of people gain any amount money than those that lose any amount of money is less easy to analyse, but, given that a person can only lose 100% of their money (not taking into account massively unwise loans people might take out, for simplicity) but some people do gain much more than 100%, it is likely that average person has lost or will lose money.
- tick_tock_tick 5y agoI mean in that sense so is the normal stock market....
- user-the-name 5y agoIt is not. Dividends, stock buybacks and the value of voting rights change the situation. Trading some stocks might still be a negative-sum game, but not all. However, all cryptocurrencies are.
- lexapro 5y agoAlphabet Inc. Class C stock has no voting rights and has never paid a dividend. On average buyers of this stock still made money, because the stock price kept going up. The last person to hold it owns a valuable asset that is generating a lot of cash, so they are also doing well and probably won't have any trouble selling it for a profit. Btw there are cryptocurrencies who pay out staking rewards.
- user-the-name 5y agoEven if a cryptocurrency pays out staking rewards, you still have a negative-sum game, because all of those rewards come from other people buying in.
- marcosdumay 5y agoWell, it is. The only way money enters the crypto market is by people buying it, and it leaves both by people selling and by intermediaries taxing transactions. So, on an average, people must lose money.
- lexapro 5y agoThat's obviously wrong if the price keeps going up like it has.
- user-the-name 5y agoNot at all. The state of the market does not affect this in any way whatsoever. The only thing that changes when the price changes is who wins and who loses. But on average, you always lose, this is an inescapable fact.
- perl4ever 5y agoIf there are two people, and one bitcoin in the world, and one person buys the bitcoin for $1 and sells it to the other person for $2, who has lost money?
- marcosdumay 5y agoUp to now, the second person is $2 short.
- perl4ever 5y agoThat seems to privilege dollars as more "real" than crypto in some way. Or is the point that between quotes in an illiquid market, everything is worthless?
- user-the-name 5y agoBoth of these are true, but not necessary for the argument. "One bitcoin in the world traded once" is an extreme edge case where the normally negligible factors dominate the calculation. Consider instead that there is one bitcoin, that one hundred people sell to each other in a long chain, for varying prices, playing a small fee each time. If you add up the cash inflow and outflows, you will get a net negative per person equal to the average fee paid.
- rhacker 5y agoIt isn't about averages of a single person. If we're talking about 500 people (for example), if 220 win big on Crypto, that's 220 people with "f*ck you" money. Even if the other 280 lose money and the average is "loss" that doesn't stop the others from leaving a job.
- user-the-name 5y agoYou don't get 220 people with fuck you money and 280 that lose. You can only lose 100%, so you will need many, many more people to lose money for even a single fuck-you-money person. You are much more likely to get one person with fuck you money and 499 losing most of their money. And when you sum up all their money before and after, they will have less money after.
- ipaddr 5y agoOn average people have made tons of money. The earlier involved the better. If the market is growing you will see values increase.
- user-the-name 5y agoIncorrect. On average, people have lost money, and this will continue to be the case forever, no matter how the market evolves.
- drekipus 5y agoWelcome to how pyramid schemes work. The money gained is when you pull out and other people buy in
- user-the-name 5y agoYes, bitcoin is functionally exactly like a pyramid scheme, even if it may not intentionally be run as one.