Amateur Traders Cause Bubbles - page 3.

ultrloa

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Quote from: jaysabi on June 23, 2021, 10:40:43 AM

Quote from: Poker Player on June 14, 2021, 12:56:24 AM

Quote from: jaysabi on June 13, 2021, 08:19:41 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.

teosanru

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Quote from: Silberman on June 23, 2021, 10:35:07 AM

Quote from: teosanru on June 20, 2021, 02:44:06 PM

Quote from: jaysabi on June 13, 2021, 08:19:41 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.

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Quote from: oHnK on June 23, 2021, 08:22:30 AM

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.

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Quote from: Poker Player on June 14, 2021, 12:56:24 AM

Quote from: jaysabi on June 13, 2021, 08:19:41 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.

Silberman

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Quote from: teosanru on June 20, 2021, 02:44:06 PM

Quote from: jaysabi on June 13, 2021, 08:19:41 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.

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Quote from: jrrsparkles on June 23, 2021, 05:27:10 AM

Quote from: oHnK on June 22, 2021, 10:44:48 AM

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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Quote from: oHnK on June 22, 2021, 10:44:48 AM

Quote from: jrrsparkles on June 22, 2021, 10:12:48 AM

Quote from: magneto on June 19, 2021, 09:33:51 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.

Traders and retail investors are highly manipulated but we should stand out from them if we want to be successful and it seems most people in the crypto community is not doing it that is why we are always facing the panic selling whenever the price drops a bit, but we have to get used to it and also it can be an advantage for an individual to buy the assets for cheap prices who are willing to HODL.

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?

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Quote from: oHnK on June 22, 2021, 10:44:48 AM

Quote from: jrrsparkles on June 22, 2021, 10:12:48 AM

Quote from: magneto on June 19, 2021, 09:33:51 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.

Traders and retail investors are highly manipulated but we should stand out from them if we want to be successful and it seems most people in the crypto community is not doing it that is why we are always facing the panic selling whenever the price drops a bit, but we have to get used to it and also it can be an advantage for an individual to buy the assets for cheap prices who are willing to HODL.

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.

There are instances which cant really be avoided due to unpredictability of the market on where no matter how hard we do try on making out those good positions but due to sudden change of market movements which will really be putting us up on hard situation.

I dont really believe about those Amateur trade causes bubbles, in some part this is true but the market doesnt move out only with small portion
which generally involves lots of people who had been dealing and trading with the market so there would be no exception.

radjie

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if there are a lot of amateur traders who are compactly influencing the market price then there is a possibility that some amateur traders are able to create a little bubble on the market price and of course it is not worth the huge influence that the whales play

ChrisPop

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I don't think the "amateur" traders have the financial power to cause bubbles. Bubbles are a joint creation between all the market participants. After all if for example TSLA is trading at 1000x earnings that is the market consensus. Same with Bitcoin - amateur traders are unlikely to have the deep pockets to sustain liquidity at 5-6 figures levels. Sincerely, I haven't only read that the experiment was made on students vs professional traders. Come on.. most students' net worth is negative, not even talking about moving the market or causing any kind of bubbles - maybe the student loan bubble. Tongue

oHnK

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Quote from: jrrsparkles on June 22, 2021, 10:12:48 AM

Quote from: magneto on June 19, 2021, 09:33:51 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.

Traders and retail investors are highly manipulated but we should stand out from them if we want to be successful and it seems most people in the crypto community is not doing it that is why we are always facing the panic selling whenever the price drops a bit, but we have to get used to it and also it can be an advantage for an individual to buy the assets for cheap prices who are willing to HODL.

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.

jrrsparkles

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Quote from: magneto on June 19, 2021, 09:33:51 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.

Traders and retail investors are highly manipulated but we should stand out from them if we want to be successful and it seems most people in the crypto community is not doing it that is why we are always facing the panic selling whenever the price drops a bit, but we have to get used to it and also it can be an advantage for an individual to buy the assets for cheap prices who are willing to HODL.

AicecreaME

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Quote from: jaysabi on June 13, 2021, 08:19:41 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 really think amateur traders play a big role in bitcoin volatility aside being its natural state.

Nowadays, bitcoin became more popular. It has higher demands compared to the past few years due to pandemic situation. The majority are finding ways to earn some income as well as alternative form of entertainment or past-time that could help them survive being stuck at home. That being said, a lot of begginers have entered the bitcoin community, which made them take a large portion of the users of btc.

It is a nice thing to have new users, don't get me wrong. However, these newbies usually tend to follow gossips and random information circulating the mainstream media. The begginers are usually worried and bothered so much that they ride the hype and participates to selling despite the losses due to FOMO. With this, the market becomes more volatile than it originally is. And most of the time, the whales are the ones benefiting - they can buy coins at a lower price and they can gain more profits.

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Quote from: AndySt on June 20, 2021, 06:45:50 PM

Bubbles can form in different areas of the market and lead to the same results, but the reasons why this happened may be different, but you should not put market professionals and amateur traders in one pile because of this.

Well the cause of the bubble might not be completely prove-able. But the propagation of the bubble is mostly done by the bigger whales. The retail investors are not having a money pile that can move the market to increase or decrease the bubble but the whales do.

So one single amateur trader will not cause the bubbles but the hype that is kept on growing by several or hoards of traders will lead to bubbles. Add to that some social media lowlifes who want to make a profit off the bubbles will cause discordance in the growth of the bubble leading to problems for those who are holding for short term.

Overall, it is a part of the bull/bear cycle and bubbles are going to happen. Point is to profit from the rise and not be stubbornly following someone because they "seem to be too active on social media". Retail investors can also take calculated decisions and educated guesses, it is not correct to always blame them for bubbles.

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Quote from: magneto on June 19, 2021, 09:33:51 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.

You correctly said that it is the best retail investors who have good abilities, but unfortunately we cannot say this about all amateur traders simply because the absolute majority of them lack knowledge and experience and are prone to making impulsive decisions that are not always justified by the logic of the market. However, the same can be said about any sector of the market. Bubbles can form in different areas of the market and lead to the same results, but the reasons why this happened may be different, but you should not put market professionals and amateur traders in one pile because of this.

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Quote from: Yatsan on June 20, 2021, 04:49:59 PM

Amateur traders do have some implications on the market but they are not that strong enough to dominate the whole market to set it into bubble state. But since they are amateurs that have no decent experience and are having a hard time dealing with the market situation, they were the ones to be easily lured to sell and spread FUD which have a big implication into other users having a sudden moderate movement to happen but that will not exactly be the reason for the bubble. Big institutions or big holders are also the ones dominating the market and it is not duly exact what factor causes the bubble for certain reasons are still unidentifiable

I do agree with that. Amateur traders don't have the capability to cause such bubbles. Most of them are just small time traders. For whales in the market, I don't think they can be considered as amateur traders as they have been in this market long enough to know how to potentially influence the market. Amateur ones may influence others by spreading fud owed to what they have experienced. But I don't think they have the capability to make big impact in the market.

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Amateur traders do have some implications on the market but they are not that strong enough to dominate the whole market to set it into bubble state. But since they are amateurs that have no decent experience and are having a hard time dealing with the market situation, they were the ones to be easily lured to sell and spread FUD which have a big implication into other users having a sudden moderate movement to happen but that will not exactly be the reason for the bubble. Big institutions or big holders are also the ones dominating the market and it is not duly exact what factor causes the bubble for certain reasons are still unidentifiable

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Quote from: Golftech on June 19, 2021, 09:43:54 PM

There are more amateurs than those who are experienced and wise investors, once those heavy weights

start moving their assets, both sides amateurs are being moved as well, they know how to play from both

emotions and understanding, we can still see this influence from the current situations.

Shouldn't it be better for veteran traders? I mean think about it, if you are a veteran trader and there are a lot of amateurs in the trading market that means you should be doing better than them and while they are losing money, who are they losing to? They should be losing to the veterans. However most likely outcome during periods like this is that there are people on each side losing money and that is the cause of the coin dropping and everyone being unhappy.

I do not think that we should allow something like this to fully blamed on noobs, sure they are making bad decisions but not like veterans are picking up their slack and making a profit while keeping it high, they are taking advantage of it or they are losing with them. This is why I think there was a huge hype, something can't go up forever, and there was a fall eventually which all makes sense and it is totally fine.

Princejebs

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Naturally, I think human is programmed to try to outsmart each other. That's why, whenever they see opportunities, they tried to risk it even when they don't fully have the knowledge of what they are actually doing and when everyone do the same, that's how the bubbles began like joke.
Those who where patient enough to hold from the initial begin take their money out as soon as they sees immense gain, then the late comer becomes the bag holder on lost. Grin

teosanru

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Quote from: jaysabi on June 13, 2021, 08:19:41 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.

Topic: Amateur Traders Cause Bubbles - page 3. (Read 878 times)