Here's how game theory can help traders understand crypto
The Scoop
DeFi
Selena Capital is one of the first firms to get a seat on the Spartan council. The firm provides liquidity in DeFi and different exchanges, but also invests in new projects. It's working with DAOs like DYDX who are trying to make their app chain decentralized.
While the crypto market may seem chaotic to the outside observer, game theory can be used to analyze the underlying dynamics that lead to volatile price action.
Jordi Alexander, Founder & CIO of Selini Capital, has a track record for utilizing game theory to predict crypto market events — including the collapse of the TerraUSD 'stablecoin' last year.
In this episode of The Scoop, Alexander unpacks how individual cryptocurrencies derive their value, and explains how game theory can be used to demystify crypto market behavior.
According to Alexander, the value of cryptocurrencies comes largely from their potential for some future utility:
“A lot of these tokens, including the big ones, including Bitcoin and Ethereum, they’re options, and you have to understand what gives an option value . . . Ethereum is an option on all the future apps that can be built and use that platform . . . Bitcoin is a call option on it being an alternative to the fiat financial system.”
In addition to economic predictions, game theory can also be applied to crypto in a geopolitical context when it comes to regulation.
As Alexander explains, the United States unilaterally banning crypto would do little to stop the growth of the industry:
"If they ban [crypto] over here, game theory stipulates that there's going to be so much demand that will get satisfied by another country providing it that maybe it's actually not good for the United States to ban and assume that this is going to go away because it's not going to stop crypto from developing — it'll just drive it to somewhere else."
This episode is brought to you by our sponsors Circle, Railgun, Flare Network, NordVPN
About Circle
Circle is a global financial technology company helping money move at internet speed. Our mission is to raise global economic prosperity through the frictionless exchange of value. Visit Circle.com to learn more.
About Railgun
RAILGUN is a private DeFi solution on Ethereum, BSC, Arbitrum, and Polygon. Shield any ERC-20 token and any NFT into a Private Balance and let RAILGUN’s Zero-Knowledge cryptography encrypt your address, balance, and transaction history. You can also bring privacy to your project with RAILGUN SDK and be sure to check out RAILGUN with partner project Railway Wallet, also available on iOS and Android. Visit Railgun.org to find out more.
About Flare
Flare is an EVM-based Layer 1 blockchain designed to allow developers to build applications that can use data from other blockchains and the internet. By providing decentralized access to a wide variety of high integrity data from other blockchains and the internet, Flare enables new use cases and monetisation models. Build better and connect everything at Flare.Network
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