Key Facts: Zero-day options account for half of all S&P 500 Index options trades. Speculative behavior in the cryptocurrency world is not much different from that on Wall Street. According to Anthony Pompliano, a well-known figure in the bitcoin field, there are more “degenerates” on Wall Street, that is, in traditional financial markets, than in cryptocurrency markets. The investor considers this a key fact, On whose understanding the correct prospecting of cryptocurrency markets ten years from now depends.
A key idea we need to understand for the next decade is that there are more degenerates on Wall Street than in cryptocurrencies. The madness doesn't really start until the big equity funds start playing the long tail. Anthony Pompliano, bitcoiner.
This inclination of financial markets towards excessive speculation would be demonstrated by the amount of new leveraged exchange-traded products (ETPs).
Information shared by Eric Balchunas, Bloomberg analyst, shows how on March 26 alone, at least 8 of them were launched in Europe.
High leverage produces liquidations when prices go against those indicated by traders. Source: X.com These products offer leverage, that is, the possibility of using a fraction of credit up to four or five times the total value invested in purchasing them. Leverage means an opportunity and a risk for the user's account: If the trader goes long and the asset rises, he will earn in proportion to his initial investment and his leverage multiplier. But if you execute a long and the asset goes down, you will lose in the same proportion.
Financial options to play the lottery
Another “symptom” of the high levels of speculation in traditional markets can be observed in the number of Zero Days to Expiration (0DTE) options products; in Spanish, «from zero days until maturity.»
“Zero-day options have increased in popularity.” Source: Chicago Board Options Exchange These types of investments are considered highly speculative and risky because the contracts are executed in a matter of hours. This means that many traders decide on them less than a day before an option expires to make quick profits. This implies unpredictability, volatility and mandatory and sometimes excessive extra payments in the form of premiums. For these reasons, 0DTE have been labeled as equivalent to the lottery. An option is a contract that gives the buyer the right (but not the obligation) to buy or sell an asset within a specific period that may expire. If this period expires before the option is exercised, the contract is invalidated.
Are traditional markets more “conservative” than cryptocurrency markets?
These types of investments in speculative financial products do not seem to differ too much from trading memecoins and cryptocurrencies. This is contrary to the long-held idea that cryptocurrency markets host an investor profile that is essentially different from that of traditional finance: that of the compulsive gambler.
Given the evidence, both investment “vehicles”, both cryptocurrencies and traditional assets, are used by similar profiles: people with high time preference and eager to obtain quick money in exchange for participating in high-risk markets.
What if the Investors and the “degenerates” are the same people?
According to Jim Bianco, president and “macro strategist” of Bianco Research, we live in a society of speculators. For the investor and analyst, today it is impossible to establish a differentiation between “degenerates” and investors. Bianco leaves an interesting opinion that there is no such gap between traditional investors and crypto investors, ensuring that the amount of speculation in bitcoin and cryptocurrencies is small compared to anything that is happening in traditional markets.