Amateur Traders Cause Bubbles - page 2.

Ziskinberg

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Quote from: Princejebs on June 27, 2021, 05:25:08 PM

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

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.

Princejebs

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

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.

wiss19

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Quote from: ivankoh on June 27, 2021, 02:23:50 PM

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.

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Quote from: jaysabi on June 13, 2021, 09:19:41 PM

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.

TheGreatPython

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Quote from: meser# on June 27, 2021, 07:01:49 AM

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.

shield132

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Quote from: davis196 on June 14, 2021, 02:26:59 AM

Quote from: Poker Player on June 14, 2021, 01:56:24 AM

Quote from: jaysabi on June 13, 2021, 09:19:41 PM

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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Quote from: CoolerSid on June 27, 2021, 09:20:51 AM

Quote from: meser# on June 27, 2021, 07:01:49 AM

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.

jossiel

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Quote from: meser# on June 27, 2021, 07:01:49 AM

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.

jaysabi

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Quote from: ene1980 on June 26, 2021, 02:35:42 PM

Quote from: Silberman on June 23, 2021, 11:35:07 AM

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.

CoolerSid

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Quote from: meser# on June 27, 2021, 07:01:49 AM

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

meser#

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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.

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Quote from: jaysabi on June 13, 2021, 09:19:41 PM

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.

Ultegra134

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Quote from: Asuspawer09 on June 26, 2021, 03:08:18 PM

Quote from: jaysabi on June 13, 2021, 09:19:41 PM

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.

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Quote from: Silberman on June 26, 2021, 02:06:39 PM

Quote from: teosanru on June 23, 2021, 04:13:13 PM

Quote from: Silberman on June 23, 2021, 11:35:07 AM

Quote from: teosanru on June 20, 2021, 03:44:06 PM

Quote from: jaysabi on June 13, 2021, 09:19:41 PM

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.

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Quote from: jaysabi on June 13, 2021, 09:19:41 PM

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.

Gyfts

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Quote from: magneto on June 19, 2021, 10:33:51 PM

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.

ene1980

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Quote from: Silberman on June 23, 2021, 11:35:07 AM

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.

Silberman

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Quote from: teosanru on June 23, 2021, 04:13:13 PM

Quote from: Silberman on June 23, 2021, 11:35:07 AM

Quote from: teosanru on June 20, 2021, 03:44:06 PM

Quote from: jaysabi on June 13, 2021, 09:19:41 PM

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.

Karartma1

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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.

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Quote from: ultrloa on June 23, 2021, 07:59:08 PM

Quote from: jaysabi on June 23, 2021, 11:40:43 AM

Quote from: Poker Player on June 14, 2021, 01:56:24 AM

Quote from: jaysabi on June 13, 2021, 09:19:41 PM

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

Topic: Amateur Traders Cause Bubbles - page 2. (Read 815 times)