What is the difference between gambling and investing?

0


In January 2021, a group of anonymous traders on Reddit took on a group of Wall Street hedge funds in a high-stakes stock market betting game (re: GameStop saga). The popular narrative says the traders on Reddit won.

However, new evidence suggests the GameStop saga was not as clear-cut as hedge funds compared to retail traders. In fact, many large institutions have also made a lot of money.

The “bad guys” on Wall Street have lost billions of dollars. People around the world applauded that David had defeated Goliath.

Inspired by these events, another group of traders came up with another coordinated “ buy and hold ” – this time for the XRP cryptocurrency (commonly referred to as Ripple). The target date: February 1, 2021, 8:30 a.m.

The price of XRP has jumped. It increased by almost 300% the week before February 1. And then at six in the morning, two and a half hours before people were supposed to buy together, the price started to drop. Just in time at 8:30 am, it crashed.

The price of XRP fell 49% that day, leaving buyers hoping for a quick wealth in tears. I’m pretty sure now that the coordinated “buy and hold” was actually jerks pulling a pump and a dump.

Two very different stories. But from the questions that were put to me just before February 1, I realize that a lot of people actually thought the GameStop and XRP situations were very similar.

Perhaps the organizers deliberately misrepresented it as the same thing – large groups of ordinary people fighting against the establishment.

But in GameStop, the opponents were (supposedly) evil hedge funds. In XRP, the “adversaries” were in fact their fellow investors.

It was a very different situation, but you might not have realized it unless you had some trading experience.

Gambling is when you don’t know what you are doing with your money, but still hope to profit from it.



Source link

Share.

Leave A Reply