Amateur Traders Cause Bubbles

[oHnK]

When you decided to hold ur asset, u should be aware that hold isn't always safe ur asset but u need to use another strategy. Maybe hold can work if u buy BTC at the lower price since several years ago, but if you buy at the top price, ur asset become shit if u still hold without take average down strategy. For example, I decided to hold without take another way then I got loss so much. My unrealise gain become realise loss, and give me much hit. This is pure my mistake because didn't watch my portofolio as well.

Let me explain about that, in 2017 the price of BTC went upto 20K and lot of people also bought at that price but very sooner the price started to fall and keep falling like what you mentioned as shit but in 2021 the price went to $60K so even people who bought at the last peak price made 3x profits if they hold it until 2021 which is 300% returns for them which is actually not possible in traditional investment such as stocks,gold, etc.

So now decide that whether you are going to hold it or sell it for loss?

What you say is not entirely wrong because from your perception it is your experience.  If you are like me who saw the phenomenon in my circle of friends who bought BTC without knowledge and bought it at the highest peak of 64k USD for 600USD, currently the asset is only worth 318USD (a loss of approximately 50%).  This means that if he just holds it and lets it go he needs to wait for the price of BTC to go up by 90%.  So, it is much more difficult if he does not buy again at the lower price to reduce the difference in his losses.

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[Silberman]

A study done by the New York Fed suggests that when trading in an asset becomes dominated by amateur traders, it tends to form asset bubbles.  The study further noted that amateur traders do not aggregate private information well and show lower levels of strategic sophistication than professional traders.  It pretty well explains the volatility that dominates the Bitcoin market without being a study about Bitcoin.

Fed Report:  https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr939.pdf

I think it was pretty obvious even without any study proving it. But yes I beg to differ with one thing. I think that such amateurs exist in every market. They are not just here into the crypto markets but do exist in stock markets too. It's just that stock market has become so old and matured that it doesn't has that huge fluctuations because of huge sums involved otherwise the number of amateurs are pretty much the same here too. Also regulations cut down volatility by a slight percentage too.

The stock market being a centralized market has a bunch of rules that reduce the volatility, its volume is higher and there are so many good stocks that the market does not depend on a single one, this market is the complete opposite of that and while this is great this has the effect of creating way more volatility, however the newbies do not realize the profits they dream about are caused by that volatility and that just as they can earn money with it they can also lose it.

[jaysabi]

 It pretty well explains the volatility that dominates the Bitcoin market without being a study about Bitcoin.

I don't think that can be applied to Bitcoin nowadays as amateur traders don't dominate the Bitcoin market. They have some influence but they definitely don't dominate it. If you were talking about the past, maybe the 2016-2017 market I could agree, but not nowadays.

That said, it must be recognized that they have influence over the price, especially when they are over-leveraged and at the slightest drop in the price they get margin calls, thus lowering the price even more, as we saw recently.

I think quite the opposite. Bitcoin has always been driven by individual investors, it's only very recently that institutional investors starting getting involved.  Whether individual investors still drive most of the trading is debatable, but you'd have to have data to support an argument that what has always been is no longer.

[jaberwock]

If you are like me who saw the phenomenon in my circle of friends who bought BTC without knowledge and bought it at the highest peak of 64k USD for 600USD, currently the asset is only worth 318USD (a loss of approximately 50%).  This means that if he just holds it and lets it go he needs to wait for the price of BTC to go up by 90%.  So, it is much more difficult if he does not buy again at the lower price to reduce the difference in his losses.

Well, there are few things with what you just said that could be changed. For example, if you are someone who bought at 64k, then is it really markets fault that you bought at the absolute peak? That is literally ATH that you bought, that is of course understandable because every high was a new ATH and who would guess that we could move from under 4k in march 2020 to 64k this year, at 20k it was ATH, at 25k it was ATH, at 30k it was ATH.... so and so forth until 64k and everyone so far made a profit so you imagined you would too, but it is smarter to buy when it is going down and not when it is going up, that is an established rule in investment.

Secondly you could always keep buying at these prices to drop, that is not a bad tactic, you know DCA in that case and then you should feel fine. And lastly we are talking about crypto here, it can go up 90%, it can go up 5x as well, that is why we are here, 90% in crypto is not impossible, in fact it is quite tame.

[teosanru]

A study done by the New York Fed suggests that when trading in an asset becomes dominated by amateur traders, it tends to form asset bubbles.  The study further noted that amateur traders do not aggregate private information well and show lower levels of strategic sophistication than professional traders.  It pretty well explains the volatility that dominates the Bitcoin market without being a study about Bitcoin.

Fed Report:  https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr939.pdf

I think it was pretty obvious even without any study proving it. But yes I beg to differ with one thing. I think that such amateurs exist in every market. They are not just here into the crypto markets but do exist in stock markets too. It's just that stock market has become so old and matured that it doesn't has that huge fluctuations because of huge sums involved otherwise the number of amateurs are pretty much the same here too. Also regulations cut down volatility by a slight percentage too.

The stock market being a centralized market has a bunch of rules that reduce the volatility, its volume is higher and there are so many good stocks that the market does not depend on a single one, this market is the complete opposite of that and while this is great this has the effect of creating way more volatility, however the newbies do not realize the profits they dream about are caused by that volatility and that just as they can earn money with it they can also lose it.

I think the only difference is the Age of the markets, how can we compare a 200-year-old stock exchange which has stocks of companies more than 100-year-old with a market which has emerged in just last 5-6 years and is still evolving as it hasn't really reached enough number of people. The earlier is obviously much more mature and has seen various seasons and times therefore the reliability of people in those markets is much higher which leads to lesser FUD and FOMO, therefore, lesser volatility, whereas when bitcoin crashes 80% of people feel it's the end of cryptocurrencies.

[ultrloa]

 It pretty well explains the volatility that dominates the Bitcoin market without being a study about Bitcoin.

I don't think that can be applied to Bitcoin nowadays as amateur traders don't dominate the Bitcoin market. They have some influence but they definitely don't dominate it. If you were talking about the past, maybe the 2016-2017 market I could agree, but not nowadays.

That said, it must be recognized that they have influence over the price, especially when they are over-leveraged and at the slightest drop in the price they get margin calls, thus lowering the price even more, as we saw recently.

I think quite the opposite. Bitcoin has always been driven by individual investors, it's only very recently that institutional investors starting getting involved.  Whether individual investors still drive most of the trading is debatable, but you'd have to have data to support an argument that what has always been is no longer.

But it always been pump when the hopes of majority us so high thats why we can see a huge price increase if there are certain hypes spreading on mainstream media. Also we can see so many crybabies after the market crash so we can really say that those guys are contributors and somehow they are one of the reason why bitcoin can be consider as bubble for now.

[wahyu wida]

 It pretty well explains the volatility that dominates the Bitcoin market without being a study about Bitcoin.

I don't think that can be applied to Bitcoin nowadays as amateur traders don't dominate the Bitcoin market. They have some influence but they definitely don't dominate it. If you were talking about the past, maybe the 2016-2017 market I could agree, but not nowadays.

That said, it must be recognized that they have influence over the price, especially when they are over-leveraged and at the slightest drop in the price they get margin calls, thus lowering the price even more, as we saw recently.

I think quite the opposite. Bitcoin has always been driven by individual investors, it's only very recently that institutional investors starting getting involved.  Whether individual investors still drive most of the trading is debatable, but you'd have to have data to support an argument that what has always been is no longer.

But it always been pump when the hopes of majority us so high thats why we can see a huge price increase if there are certain hypes spreading on mainstream media. Also we can see so many crybabies after the market crash so we can really say that those guys are contributors and somehow they are one of the reason why bitcoin can be consider as bubble for now.

yes they are mostly amateur traders who trade using feelings. they will talk more than correct the mistakes that have been made. lulled by the situation when the pump occurred and regretted it during the dump, so only hope and hope that the market will return to the peak. even many of them panicked to sell so that they contributed to the dump

[Karartma1]

Surely a market made of people completely unaware of the instruments in which they invest, especially in the altcoin sector, doesn't help. Much of the market manipulation however is done at higher levels and the stupid who buys high and sell low always get screwed. But this is it, every market works in the same way so if people don't understand the real value of bitcoin, that's their problem.

[Silberman]

A study done by the New York Fed suggests that when trading in an asset becomes dominated by amateur traders, it tends to form asset bubbles.  The study further noted that amateur traders do not aggregate private information well and show lower levels of strategic sophistication than professional traders.  It pretty well explains the volatility that dominates the Bitcoin market without being a study about Bitcoin.

Fed Report:  https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr939.pdf

I think it was pretty obvious even without any study proving it. But yes I beg to differ with one thing. I think that such amateurs exist in every market. They are not just here into the crypto markets but do exist in stock markets too. It's just that stock market has become so old and matured that it doesn't has that huge fluctuations because of huge sums involved otherwise the number of amateurs are pretty much the same here too. Also regulations cut down volatility by a slight percentage too.

The stock market being a centralized market has a bunch of rules that reduce the volatility, its volume is higher and there are so many good stocks that the market does not depend on a single one, this market is the complete opposite of that and while this is great this has the effect of creating way more volatility, however the newbies do not realize the profits they dream about are caused by that volatility and that just as they can earn money with it they can also lose it.

I think the only difference is the Age of the markets, how can we compare a 200-year-old stock exchange which has stocks of companies more than 100-year-old with a market which has emerged in just last 5-6 years and is still evolving as it hasn't really reached enough number of people. The earlier is obviously much more mature and has seen various seasons and times therefore the reliability of people in those markets is much higher which leads to lesser FUD and FOMO, therefore, lesser volatility, whereas when bitcoin crashes 80% of people feel it's the end of cryptocurrencies.

Without a doubt the age of the market is one huge factor however another factor are governments themselves, governments do in fact enforce some rules in the traditional markets that lower the volatility, however since they know they cannot really control this market they do not know how to act and it is even likely they try to manipulate it to make it even more volatile, and one example of this is what Elon did, in any other market he will be arrested by market manipulation but since it happened here no one cares.

[ene1980]

The stock market being a centralized market has a bunch of rules that reduce the volatility, its volume is higher and there are so many good stocks that the market does not depend on a single one, this market is the complete opposite of that and while this is great this has the effect of creating way more volatility, however the newbies do not realize the profits they dream about are caused by that volatility and that just as they can earn money with it they can also lose it.

Anyone who is an active trader in the stock market would be scared when they see the volatility in the cryptocurrency market and there is a probability that they will sell off their coins at a loss and basically these panic sell off happens if they are not doing their proper homework before investment and if you are willing to take the risk without the proper homework then you are bound to end up in a loss because the volatility in the cryptocurrency market is nothing new.

[Gyfts]

What a load of rubbish.

It's as if they haven't seen the state of the real estate market and how that is the biggest bubble out of anything over the last couple of decades, almost solely driven by institutional investors and developers.

This is a blatant attack on retail investors and their ability to make decisions. The best retail investors are just as capable (if not more so) than biased Wall Street analysts that recommend stocks/funds for their own gain.

Well I'm convinced there might be another real estate bubble by intuitional investors, like the fine folks behind Blackrock that are buying up homes at 1.2x-1.5x the home's value.

Obvious play here is so they can monopolize a local area and force people into the renters class, but by paying out 1.2x-1.5x on every property, you start to create an artificial housing bubble. With USD inflation, housing prices were already increasing with people dumping out their dollars on physical properties, and it's not the amateur's that were doing this.

[Asuspawer09]

A study done by the New York Fed suggests that when trading in an asset becomes dominated by amateur traders, it tends to form asset bubbles.  The study further noted that amateur traders do not aggregate private information well and show lower levels of strategic sophistication than professional traders.  It pretty well explains the volatility that dominates the Bitcoin market without being a study about Bitcoin.

Fed Report:  https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr939.pdf

I would agree with that since there are a lot of newcomers here in the cryptocurrency or like for example here in bitcoin, After crossing the ATH of 20k$ the market just exploded and that is the time when the bitcoin is trading and a lot of newcomers are also investing in bitcoin.

Bitcoin just exploded up to 60K$ which is pretty high from the past ATH of around 20k$, newcomers that don't have enough experience and just new to bitcoin are not used to dumps, because they think that the market will just continue to go bigger and bigger. That is why a lot of newbies lose a lot of money after the Tesla bitcoin announcement newbies easily panic sells dropping the price to around 30k$.

So I think Amateurs are a huge cause of these bubbles but at the same time they were needed to reach new Heights and increase the marketcap as they gain experience, the growth was huge and the next time the market comeback it will be a huge bubble again. We could totally reach even a 1million dollar price in bitcoin but it will be a big bump of the pump and dump that is going to happen before reaching that.

[teosanru]

A study done by the New York Fed suggests that when trading in an asset becomes dominated by amateur traders, it tends to form asset bubbles.  The study further noted that amateur traders do not aggregate private information well and show lower levels of strategic sophistication than professional traders.  It pretty well explains the volatility that dominates the Bitcoin market without being a study about Bitcoin.

Fed Report:  https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr939.pdf

I think it was pretty obvious even without any study proving it. But yes I beg to differ with one thing. I think that such amateurs exist in every market. They are not just here into the crypto markets but do exist in stock markets too. It's just that stock market has become so old and matured that it doesn't has that huge fluctuations because of huge sums involved otherwise the number of amateurs are pretty much the same here too. Also regulations cut down volatility by a slight percentage too.

The stock market being a centralized market has a bunch of rules that reduce the volatility, its volume is higher and there are so many good stocks that the market does not depend on a single one, this market is the complete opposite of that and while this is great this has the effect of creating way more volatility, however the newbies do not realize the profits they dream about are caused by that volatility and that just as they can earn money with it they can also lose it.

I think the only difference is the Age of the markets, how can we compare a 200-year-old stock exchange which has stocks of companies more than 100-year-old with a market which has emerged in just last 5-6 years and is still evolving as it hasn't really reached enough number of people. The earlier is obviously much more mature and has seen various seasons and times therefore the reliability of people in those markets is much higher which leads to lesser FUD and FOMO, therefore, lesser volatility, whereas when bitcoin crashes 80% of people feel it's the end of cryptocurrencies.

Without a doubt the age of the market is one huge factor however another factor are governments themselves, governments do in fact enforce some rules in the traditional markets that lower the volatility, however since they know they cannot really control this market they do not know how to act and it is even likely they try to manipulate it to make it even more volatile, and one example of this is what Elon did, in any other market he will be arrested by market manipulation but since it happened here no one cares.

True, applying upper circuit and lower circuit to the stocks which have huge volatility is one major thing which governments do to control volatility but arrest of Elon is too much.  A few days ago a major business journalist in India made a very dubious tweet without any name of any business group but still one business group terribly crashed by around 20-25% when the market opened after that tweet. So these things are pretty normal in every market, there aren't many actions that happen.

[Ultegra134]

A study done by the New York Fed suggests that when trading in an asset becomes dominated by amateur traders, it tends to form asset bubbles.  The study further noted that amateur traders do not aggregate private information well and show lower levels of strategic sophistication than professional traders.  It pretty well explains the volatility that dominates the Bitcoin market without being a study about Bitcoin.

Fed Report:  https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr939.pdf

I would agree with that since there are a lot of newcomers here in the cryptocurrency or like for example here in bitcoin, After crossing the ATH of 20k$ the market just exploded and that is the time when the bitcoin is trading and a lot of newcomers are also investing in bitcoin.

Bitcoin just exploded up to 60K$ which is pretty high from the past ATH of around 20k$, newcomers that don't have enough experience and just new to bitcoin are not used to dumps, because they think that the market will just continue to go bigger and bigger. That is why a lot of newbies lose a lot of money after the Tesla bitcoin announcement newbies easily panic sells dropping the price to around 30k$.

So I think Amateurs are a huge cause of these bubbles but at the same time they were needed to reach new Heights and increase the marketcap as they gain experience, the growth was huge and the next time the market comeback it will be a huge bubble again. We could totally reach even a 1million dollar price in bitcoin but it will be a big bump of the pump and dump that is going to happen before reaching that.

We can't forbid newcomers though, they were one of the reasons cryptocurrencies became popular during the pandemic, everyone wanted to buy BTC after it exploded in December, crossing $20.000. This movement might have sparked a larger hype that lead us to crossing new all-time highs. Of course, they are the ones who lose first too, I bet there are people who got involved with Bitcoin when the price was $60.000.

[btc78]

A study done by the New York Fed suggests that when trading in an asset becomes dominated by amateur traders, it tends to form asset bubbles.  The study further noted that amateur traders do not aggregate private information well and show lower levels of strategic sophistication than professional traders.  It pretty well explains the volatility that dominates the Bitcoin market without being a study about Bitcoin.

Fed Report:  https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr939.pdf

How can they distinguish a Amateur trader? looking at their account transactions ? what if they have just created new account to hide their personality? remember that in crypto trading anonymity is one of the most concern mate so this can be a not completely truthful study.
though There is also a cause of the bubble when those Manipulator take place things that many denied happening but it is indeed reality.

[meser#]

Amateur traders usually go down to the well with the rope of others. Most of them listen others whisper to buy or sell. So others shitty ideas becomes theirs bubbles. When the shitty bubbles burst they learn painfully what they must to do.

[CoolerSid]

Amateur traders usually go down to the well with the rope of others. Most of them listen others whisper to buy or sell. So others shitty ideas becomes theirs bubbles. When the shitty bubbles burst they learn painfully what they must to do.

Yeap information in that way goes word of mouth

[jaysabi]

The stock market being a centralized market has a bunch of rules that reduce the volatility, its volume is higher and there are so many good stocks that the market does not depend on a single one, this market is the complete opposite of that and while this is great this has the effect of creating way more volatility, however the newbies do not realize the profits they dream about are caused by that volatility and that just as they can earn money with it they can also lose it.

Anyone who is an active trader in the stock market would be scared when they see the volatility in the cryptocurrency market and there is a probability that they will sell off their coins at a loss and basically these panic sell off happens if they are not doing their proper homework before investment and if you are willing to take the risk without the proper homework then you are bound to end up in a loss because the volatility in the cryptocurrency market is nothing new.

If you're a net buyer (of stocks or crypto) then volatility is your friend.  You want the ability to opportunistically add to your position when volatility drags the price down.  This requires you to have a longer term horizon and not care what happens in the short term day to day.  But if you're adding to your position, you want the volatility and the shaking out of weak hands because it benefits you directly.

[jossiel]

Amateur traders usually go down to the well with the rope of others. Most of them listen others whisper to buy or sell. So others shitty ideas becomes theirs bubbles. When the shitty bubbles burst they learn painfully what they must to do.

Because they have no confidence of themselves so that's why they're trying others strategy and thinks that it's going to become more effective to them.

And when the strategy goes wrong because they've listened to others signal of buying and selling, they don't have anyone to blame but only themselves.

[ivankoh]

Amateur traders usually go down to the well with the rope of others. Most of them listen others whisper to buy or sell. So others shitty ideas becomes theirs bubbles. When the shitty bubbles burst they learn painfully what they must to do.

Yeap information in that way goes word of mouth

In my opinion, a lot of young people have joined bitcoin this year. I do not deny it, but it is necessary to humbly view many angles of the market. It is not possible to place blame and blame on them alone. No one has taught them how to better manage their finances in cryptocurrency by failing.
It happened and only that loss and failure to take on longer, more mature when it comes to bitcoin and shitcoins. at the same time, the details of applicable taxes will be their pitfalls when short selling.