Amateur Traders Cause Bubbles

[awik p]

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.

and I think it is a natural action because our psychology is still in the adaptation stage. actually there is an advantage if a bubble occurs, a large market movement will automatically occur, so we can take advantage of it and find it easy to find the right position to invest. In the selection process, not everyone like you can adapt and evaluate it

[jaberwock]

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.

Eventually that number will stop. For example there are "new" investors in gold every year as well, people who are growing older enough to have money to buy those things, and people who are too old eventually die and they are gone so they are no longer buyers, whereas new kids that became adult replace them. However that is no longer a big number, we do not have too much difference between old buyers dying and new kids becoming adults and buying, the difference between them is tiny.

It means in the gold market we do not have constant new comers that increase the price, of course the price still usually goes up because it is valuable and dollar is worthless so each year dollar gets closer to toilet paper value and gold is still very valuable so the price goes up, but not because of newcomers. Bitcoin will eventually reach that level, we will not have this many newcomers in a year. Not these days, but maybe in a decade or two later.

[jaysabi]

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.

BTC price has never been rational because it's not based on anything other than speculation, so that's not a convincing argument that amateur traders support price discovery and actually works directly against the notion.  And institutional involvement in anything is guaranteed once a certain critical mass is reached, that also says nothing about the price being supportable and less than purely speculative.

The definition of bubble is self-evident; unsupported price appreciation that's not tied to fundamental value.  Amateur traders were directly responsible for the dotcom bubble and the real estate bubble because they FOMOed into assets that had no technical basis to be as high as they were.  The crypto bubbles that sprout and pop are just another in a long line of data points supporting the original thesis.

[Rasa nanas]

amateur traders dominate the market? It will not happen.
their number may indeed be large, but the assets they have are not much. I agree with you, asset bubbles occur because they only keep the assets they have for granted. but unfortunately that will not happen because forever the market will be dominated by professional traders with very large assets.

[dothebeats]

Amateur traders cause some hype and disturbance in the market, causing other experienced traders to reel them in even further and create a market scenario which will attract the newbies, causing them to invest more and more in the market. This results to a bubble, which everyone enjoys. We can see this on a few altcoin examples quite often. After the hype has died, the price will normalize, and a lot of the same newbies reeled in by the bubble will just leave the market with empty pockets.

[Expecto]

It's an inevitable scenario to be honest. Because every day, we have many more new investors in this market. And majority of them don't do a comprehensive research about the market and the cryptocurrencies. They start investing into something like this and they're instantly becoming a potential panic-seller. When we see big dumps in the market, they panic and sell their investments right away. And this causes the price of the coin to come down more.