Crypto trading and gambling are two activities that have gained significant popularity over the years. Both endeavors are similar in that they involve high risks with both having the potential for financial gains or losses. But, there are differences between the two. This article aims to provide a detailed examination of the similarities and differences between crypto trading and gambling.
Understanding crypto trading and gambling
The practice of purchasing, selling, and exchanging cryptocurrencies with the intention of making profits is known as crypto trading. It involves making informed investment decisions based on several elements, including price changes, cryptocurrency market news, and technical analysis which entails interpreting chart patterns.
The first decentralized cryptocurrency, bitcoin (BTC), was introduced in 2009, marking the beginning of crypto trading. The number of trading platforms or crypto exchanges—both centralized and decentralized—increased as additional cryptocurrencies were introduced, making it easier to purchase and sell these digital assets. Accordingly, the crypto industry expanded gradually, luring both retail traders and institutional investors alike.
As mentioned, the buying and selling of cryptocurrencies is typically facilitated by crypto exchanges. These specialized trading platforms offer real-time crypto market information, charts, and tools for examining price changes, trading activity, and other important indications. To execute trades precisely, traders can use a variety of order types, including market orders, limit orders, and stop-loss orders. Given the volatile nature of crypto assets, trading this asset class requires many skills including gaining expertise in technical analysis and fundamental analysis.
On the other hand, gambling entails placing a bet on a result that is unclear, usually in games of chance. A gambler has little or no control over the outcome of a particular bet. Simply put, gambling is a game of luck and it requires no specialized skill or training before engagement.
Gambling has a rich history that dates back many centuries. The traditional forms of gambling include poker, the lottery, sports betting, and casino games. With the introduction of the internet, online gambling sites proliferated and offered a huge selection of games to a global audience.
In gambling, there is what is referred to as “odd.” Odds, which are typically numbers, depict the likelihood for a particular result to occur. In a game such as football, many factors are often taken into account while setting the odds for every possible outcome in a particular game, including a team’s past performance, the caliber of players in a team, and so on.
Gambling activities are governed and regulated differently in different jurisdictions. While some nations have strong laws against gambling, others have more liberal policies. These laws typically exist to safeguard customers, stop criminal activity like money laundering, guarantee fair play, and encourage responsible gambling.
Similarities of Crypto Trading and Gambling
Crypto trading and gambling share several similarities, although they are distinct activities. Here are some commonalities:
- High Risk: Both crypto trading and gambling carry inherent risks. The risks are typically high risks. In other words, there is a high potential for financial gain alongside the risk of losing money in both endeavors.
- Uncertainty: Crypto trading and gambling are popular for their high degree of uncertainty regarding the outcome of a particular prediction or bet. In reality, no crypto trader or gambler can accurately predict future expectations. In both cases, participants can gain or lose money based on the result of their bets or trades.
- Emotional concerns: Both crypto trading and gambling can evoke intense emotions such as excitement, anticipation, fear, and frustration. The potential for significant gains or losses can lead to emotional highs and lows.
- Financial Knowledge: Both activities require a level of understanding of financial concepts. While gambling may require familiarity with odds and probabilities, crypto trading necessitates knowledge of markets, technical analysis, and fundamental analysis.
- Speculation: Both crypto trading and gambling involve speculation on the outcome of an event. In crypto trading, traders speculate on the future price movements of cryptocurrencies, while in gambling, individuals speculate on the outcome of games, races, or other events.
Differences between gambling and crypto trading
While there are numerous similarities between these two activities, there are also significant differences that exist between crypto trading and gambling.
On the one hand, crypto trading is based on several factors, including adequate knowledge, strategic decision-making, and fundamental and technical analyses. On the other hand, gambling is primarily based on chance and luck. Additionally, crypto trading is considered a legitimate investment activity subject to regulations in many jurisdictions, while gambling is often heavily regulated and may have legal restrictions in certain regions.
Below are other differences between crypto trading and gambling:
- Skill and luck: Crypto trading involves a combination of skill, knowledge, and analysis. Traders employ strategies, study market trends, and make informed decisions based on research. In contrast, gambling outcomes are primarily dependent on luck and chance, with minimal control over results.
- Long-term and short-term: Crypto trading often involves long-term investment strategies, with traders aiming to capitalize on the growth of crypto assets over time. But gambling tends to be more focused on short-term outcomes and is associated with quick wins or losses.
- Information and Analysis: Crypto trading requires comprehensive research, analysis of market charts/ trends, and evaluation of fundamental factors capable of impacting the value of crypto assets. In gambling, while individuals may analyze odds or game patterns, the level of research and analysis is significantly lower.
- Regulatory concerns: Crypto trading operates within a regulatory framework in many jurisdictions, with requirements such as KYC (Know Your Customer) and AML (Anti-Money Laundering) measures. Gambling regulations vary widely, with some regions imposing strict regulations, while others have more relaxed approaches.
Should crypto trading be regulated like gambling?
The similarities between crypto trading and gambling may have also spurred ongoing debate on which between financial services regulation and gambling regulation is a better regulatory approach to the risks involved in crypto trading. Recently, it was reported by Sky News that an influential panel of Members of Parliaments (MPs), United Kingdom (U.K), called on the U.K government to regulate consumer crypto trading and speculation as a type of gambling. According to them, cryptocurrencies such as bitcoin and Ether have “no intrinsic value and no useful social purpose”, consume too much energy, and are often used by scammers.
Rather than having the U.K government regulate the crypto industry by bringing it under financial services regulation, the MPs believe that a better approach would be to bring it under gambling regulation. This is due to how speculation in unbacked cryptoassets, in their view, “more closely resembles gambling than a financial service”. Therefore, the MPs recommended that the same safeguards that apply to gambling—betting firms, casinos, lotteries—should also apply to the crypto industry.
Whether regulated as gambling or as financial services, what is clear at this point is that effective regulation is needed to protect consumers from harm in the crypto market. In any case, risks posed by crypto trading are typical of those that exist in traditional financial services.
While crypto trading and gambling share certain similarities such as risk and speculation, they differ significantly in terms of skill, control, and long-term perspective. Crypto trading requires a deeper understanding of financial markets, analysis, and strategy, while gambling relies predominantly on luck and short-term outcomes. Recognizing these distinctions is essential for individuals who intend to profit from crypto trading, as maintaining a gambler’s mindset can only lead a crypto trader to incur losses.
One of the reasons most people fail in the crypto-trading business is because they approach it with a gambler’s mindset. Crypto trading is not gambling. Anyone considering the business of buying and selling crypto assets must first understand this to be successful. Understanding these differences is crucial for individuals interested in making money sustainably from crypto trading.
Read also: How to Make Money From Crypto Trading
Credit: Ndianabasi Tom
A crypto journalist and content writer who has been talking about cryptocurrency and blockchain technology since 2018, Ndianabasi is a Writer at Crypto Asset Buyer (CAB).