I've been pondering this a lot lately. At first I thougt that cryptocurrency trading/investing wasn't a zero-sum game. The reasoning behind this is that I saw cryptocurrency's overall market cap increase. As demand increases, prices rise, and everybody holding crypto would gain. Even day traders would gain more often than they lose.
Then I thought about opportinity cost: player X sells his bitcoin, which he got for $10 for $100 to player Y, making a 90 dollar profit. Then player Z, which sold for $10, has lost $90 in opportunity cost, because he could have held the bitcoin and sold it for $100. This doesn't add up though, because in the end, more net store of value is created.
If the utility of crypto is merely as a store of value, and every player is just trying to increase there store of value, then it must be a zero-sum game, right? But if only value is gained, where is it lost?
Than something dawned on me: as the demand of crypto (as a store of value) rises, then demand of fiat money (as a store of value) declines. Meaning that the winnings in the crypto market (your coin being worth more) is offset by the losses in the fiat market (your fiat money is worth less).
Since the value and amount held of fiat money far eclipses the value and amount held of crypto, the losses in the fiat market are more spread out, while the gains in the crypto market are more concentrated.
Example: 10 players hold 1 dollar and 10 players hold 10 bitcoins. 1 bitcoin equals 1 dollar, but due to changes in supply and demand the value of bitcoin rises relative to the dollar, making 1 bitcoin worth 1.10 dollar. The bitcoin holders win, the dollar holders lose.
Thoughts about this? Am I missing something?
Submitted November 16, 2017 at 02:45AM by CCPRO69 http://ift.tt/2jvsCEE
