Amateur Traders Cause Bubbles

[shield132]

 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.

Well,think twice.
Amateur traders still dominate the crypto market.Without them,the crypto whales wouldn't be able to make profits out of market manipulation,by creating FOMO and FUD phases.
Newbie traders have big influence over the stock markets as well,because of apps like Robinhood,trading has become really accessible for the "average Joe".
The volatility of the Bitcoin price can be explained with the nature of Bitcoin-limited supply and unstable demand.Rookie traders have big influence over the BTC price,without them,the volatility would be way lower and the market would be less liquid.

Who dominates the ocean, fish or whales? I guess, whales. Everything is always dominated by the whales, they just use amateur traders to achieve their aims. Whales can create the hype around project and make amateur traders to buy and buy the coin, then whales make some move that makes amateurs to panic and boom, your bubble is exploded.
Amateur traders just follow the flow that whales create, once something goes wrong (i.e. any negative news, massive sell), then people try to move away from this flow as soon as possible. Some people have a little patience compared to others and wait a little further, then they think that price falls so much that it's time for them to leave too, then others follow and once the price reaches the low point (the point when the majority of people sell), then it starts to rise again and then these panicky people are lost in vain and repeat the same.

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[TheGreatPython]

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.

Bubble, as someone explained quite nicely in another thread, is a price that is not justified, either too high or too low and I tend to agree with that. Amateur traders just trade without actually knowing why they are buying or selling which causes bubbles in the market. Imagine if a market has 150 traders and 100 fools are copying a single fool who is selling his coins, then a bubble is created because the price is down and unjustified then.

I always think that traders without knowledge and lack of understanding are also the reason behind this volatile market since they will not seek value with their investment, they only ride the bear and bull waves. A lot of whales and groups eat alive such traders because they create hype in the market and let these amateur traders buy it, then they will dump it. Almost all the meme coins are surviving and operating on this model.

[Fortify]

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

Bitcoin might very well be the perfect case study for this sort of behavior because it is primarily funded by speculation, compared to something like property for example which could have a very helpful real world usage even if a bubble was to implode. There was a combination of many unqualified investors piling in on the way up and lots of institutional money (Tesla, Paypal, Investment funds) who were aiming to lock in profits throughout. The wise money is able to move so fast that it will always beat the average small scale investor. They will be running algorithms and analysis that can predict upcoming drops in value based on historical information in other markets because they have teams built with specific purposes. That "big money" like always is the real winner here, although smaller scale buyers were beating them in the earlier years.

[wiss19]

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.

So many traders have recently joined also because of the pandemic since a lot of jobs were taken away and people had nothing but time so that is one reason why the market has so many naive and inexperienced traders right now. There is a misconception among traders that crypto trading has a lot of money and I am not saying that it's true but it hides the fact that to juice out those profits you must have the proper understanding of the trading itself. It is profitable not because it's easy but because it's volatile and has a massive opportunity for growth, unlike the stocks market which is rather saturated.

Being part of many trading and altcoins groups at telegram, I still see people being tricked by scammers by sending them the wrong tokens because there are decentralized exchanges now and anyone can list their tokens. It will take a while for most traders who are new to understand the basics of crypto trading and fundamentals to avoid being scammed or tricked.

[Princejebs]

I think bubbles is good for the market until you are caught on the wrong side of the pump. 
Newbies don't stay glued to the market the way we all do here 247, hence the moment they hear or observe that the crypto maket has captured the attention of the public, that's when most of them remove their money from savings and push them into bitcoin, the moment they all realise that the market is already over bought or the hype began to fade away, they tend to sell back and cahsout out their capital and profit which always lead to heavy fall and huge volatility.

[Ziskinberg]

I think bubbles is good for the market until you are caught on the wrong side of the pump. 

I don't think it is, the fact that it's called a bubble, it doesn't do good for the reputation of the market as it will make most people lose their money when they are eager to invest blindly. People invest because they believe on the project, and they expect the project to grow consistently, not on a pump and dump situation.

[imstillthebest]

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.

i guess they could say it because amateurs and being professional are different words but if we look on the definition of amatuers ,
 it was said that some amateurs can be good too .
 i would not put all the blame on them but manipulation is the real one that cause a bubble  .  manipulation has never been a good thing into this market  .

[FanEagle]

Bubbles are fine, as much as crashes are fine as well. These type of market movements have to happen and it is normal. By the way as far as I know a "bubble" is a major major deal, it should not be used this lightly, like the first I can think of was the tulip bubble as everyone knows, (well mansa musa dropping gold prices a ton in Egypt probably is the first one we know) and that literally destroyed some of the wealthiest people in Netherlands, because they made horrible mistakes, at some point a tulip was worth a house is no joke, it is real but what house? Not a castle for sure, just a small tiny town house for one type of deal probably at best.

Long story short bubbles are major, like 2008 crash was so big that just because american banks lost money, there were tons of nations that bankrupted like Greece and Spain, THATS bubble. Bitcoin is not in a bubble, was not in a bubble and hopefully will not be in a bubble as well.

[DrBeer]

It looks very much like a "study of British scientists" ... Amateur traders can only bring a pool of assets that will become hostages of bubbles that deliberately suit those "who are not customary to talk about on the crypto market." In short, the idea in the title looks like an attempt to find those who are "to blame for everything", except for the real culprits

[FinneysTrueVision]

There are a lot of bubbles in crypto right now thanks to newbie traders. A lot of them are putting money into meme coins and scams. I do not see these bubbles bursting all at once because there are just too many tokens out there. As long as they don't all go down simultaneously then the overall market will be fine but we will have some volatility.

[Xinarae*]

The reason bubbles for amateur traders is that they come to the market without knowing anything about the market. In case of retention of currencies if their value decreases then loss occurs later since it is often difficult to observe the underlying values ​​in real life markets bubbles are often decidedly identified only in the previous region once prices suddenly fluctuate prices can fluctuate unintentionally and it becomes impossible to predict from supply and demand alone. You need to understand the volatility of the market before looking if you have to learn you have to overcome the loss.

[TheUltraElite]

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.

Happens with the altcoins - dont you think? I have seen and heard many altcoin shills stay in their bubbles and keep buying more shitcoins only to increase their stock but not having any gains - a continuous cycle of despair.

In that sense, buying bitcoin is better for sanity. You can see the importance bitcoin is gaining from the mainstream world and you can also see the complete lack of importance being given to shitcoins, but which I mean the coins that do not fall in the top-10 list on CMC.

There are a lot of bubbles in crypto right now thanks to newbie traders. A lot of them are putting money into meme coins and scams. I do not see these bubbles bursting all at once because there are just too many tokens out there. As long as they don't all go down simultaneously then the overall market will be fine but we will have some volatility.

I would say, this happens always whenever there is a bitcoin craze. People read news and come in to buy bitcoin but find its price "too high" because they never cared to look into it when the market was bearish and hence they settle with some shitcoin. Mainly the ones being promoted at the same time, which you have correctly mentioned.

[conected]

I think bubbles is good for the market until you are caught on the wrong side of the pump. 

I don't think it is, the fact that it's called a bubble, it doesn't do good for the reputation of the market as it will make most people lose their money when they are eager to invest blindly. People invest because they believe on the project, and they expect the project to grow consistently, not on a pump and dump situation.

- But the crypto market story cannot avoid pump and dump problems, the reputation of the market may receive a bad share but in return, we achieve an expansion, people are eager to access these dangerous bubbles, some blind investors will have their lessons and we as the wise will have money, these will be repeated over and over to weed out and select the winners. You can sympathize with others, but you also need to know that victory is only for a few, there's nothing to believe in, it's all just a conspiracy of whose is better

[Golftech]

There are a lot of bubbles in crypto right now thanks to newbie traders. A lot of them are putting money into meme coins and scams. I do not see these bubbles bursting all at once because there are just too many tokens out there. As long as they don't all go down simultaneously then the overall market will be fine but we will have some volatility.

The crypto market is growing rapidly over the last 12 months. Do amateurs really have enough money to create bubbles? We are seeing more and more institutional investors in the crypto market who invest millions. While I think that amateur traders play a part in a bubble, there are not the main reason. Also amateur traders usually just follow more experienced traders.

They keep following those big players and ended up losing their money, each time whales start moving those

who intends to ride with them are the one who mostly losses their money, unknowingly take part of that market

movement they are unaware with how things will turn out.

[jaysabi]

I think bubbles is good for the market until you are caught on the wrong side of the pump. 
Newbies don't stay glued to the market the way we all do here 247, hence the moment they hear or observe that the crypto maket has captured the attention of the public, that's when most of them remove their money from savings and push them into bitcoin, the moment they all realise that the market is already over bought or the hype began to fade away, they tend to sell back and cahsout out their capital and profit which always lead to heavy fall and huge volatility.

Bubbles definitely aren't good for a market.  A bubble is an unsupportable price for an asset that does not reflect real world utility or value, so when they form it distorts the market and interrupts meaningful information about price from being discerned.  In an efficient market, bubbles don't form, but to the point of this study, amateur traders are not efficient and their lack of knowledge is what drives bubbles and distorts the market, with bad consequences for the overall market through the knock on effects of their distortion.

[Argoo]

You are maybe right in some different cases and markets but not bitcoin. I believe, bitcoin can not be dominated by the amateurs. However, according to what I know more than 90 percent of traders are actually amateur traders, no matter what they think. These newbies are usually holding a little amount of money but even these little amount of money can make the market fall/rise. That's why, In some cases people believe newbies can cause price bubbles in the markets.

The cryptocurrency market will be replenished with newbie traders for a long time to come, because not a very large number of people have cryptocurrency and even fewer even periodically trade in this market. Therefore, the reserve for such a replenishment is very significant, especially if the popularity of the cryptocurrency continues to grow. It cannot be denied that beginners will always have a certain influence on the cryptocurrency market.

[Zilon]

If a market dominated by amateur traders cause bubbles in asset even with the low level of experience and inability to maintain a steady winning trade. Then what would be said of professional traders. From my own view I was thinking professional traders should rather cause asset bubbles since the understand how price flows at every state of the market structure.

[zanezane]

Bubbles popped and never recover, so your claim that amateurs causing the bubble is already not true. Maybe they can cause the prices to go down really at an erratic pace since they have a varying level on how they trade so the movement is affected little by little.

[dmamigo]

The subject is quite true because I still believe I was one of them who used to be a part of the bubble creation when I started trading back 7-8 months ago. But soon I stopped it and increased my time to learn from fellow traders. So, I think there will be more people like me as a newbie or amateur who do such acts while trading to create or help in creating a bubble because obviously, we were not the only factors contributing to the bubble.

[Kyraishi]

And what sort of definition are they giving for a bubble?

I'd actually say that amateur traders a lot of times can support rational price discovery. BTC is a prime example of this. Was there any investment bank that was willing to back BTC at the beginning, if not for a few 'amateur' bagholders who stuck it out? Probably not.

Sure, you could argue that bubbles could form. But given the amount of bubbles that institutions have been a part of (real estate, dotcom bubble, etc.), amateur/retail investors can hardly be given the blame for the consequences.