Usually the house wins! (With the exceptions of counting cards at blackjack or beating the table at poker.) So why not try a game where the odds are — if not outright “better” — at least a lot less clear? Enter Bitcoin. No matter what your theory of its future value, there is no simple story which flat out amounts to “the house wins,” if only because of the opaqueness of the matter. It is also a fun gamble and bundled with various symbolic commitments to future tech, libertarianism, and so on. For many people that is better than affiliating with Vegas, the local football team, or perhaps Macau. You can follow the price on as frequent a basis as you wish, rather than having to wait for a sporting event to take place. And unlike in equities, futures, and options markets, you can feel — rightfully or not — that the pros also don’t know what they are doing.
I can’t find a reliable source on how much is spent on gambling each year, legal and illegal, but a variety of unreliable sources are suggesting a few hundred billion a year for the U.S. alone. It’s likely to be well over a trillion dollars worth for the world as a whole.
Let’s say one percent of that gambling demand spills over into the cryptocurrency arena. That’s a flow of $10 billion a year to fund new cryptocurrencies or bid up the value of old ones, maybe more. Bitcoin also may interest people in gambling who otherwise do not gamble or think of themselves as gambling types.
I don’t gamble and I don’t enjoy gambling, but if I were going to gamble, I would prefer to gamble with Bitcoin than to bet on a dog race. And it has to be better than buying a lottery ticket.
To the extent we are uncertain about the future gambling demand for Bitcoin, the price of Bitcoin will be correspondingly volatile. And we have no solid sources for trying to estimate such future demands. At the very least it seems likely that such demand has not yet peaked or close to it. In any case, the trading of Bitcoin itself will reveal information about the shape of the demand curve and thus the trading of the asset can inject further volatility into the market, a standard result when not everything is a flat, horizontal demand curve.