The Squid Game can explain the crypto world –

By Martin Siracusa, UBA economist and fellow in Development Economics, University of Sussex.

Have you ever wondered why cryptocurrencies are all the rage in this age? Why does a financial instrument without legal backing make millions of people trust their savings in them? Why do young people bet on games that pay with cryptocurrencies? The boom of the crypto era is so great that among the 10 strongest they gather 10% of the total of the New York Stock Exchange. You only need to consider Bitcoin to match, for example, the Spanish stock market. And there are thousands of cryptocurrencies in the world.

If you have seen “The Squid Game”, you will be able to understand more about how the behavior of investors and savers who deposit their money in the crypto world works. Why? The worldwide furor series raises as thesis one of the most discussed problems by economists: the decision between cooperating with others or distrusting them. If you remember one of the Nobel Laureates whose life made it to the screen, John Forbes Nash, you may know what the famous “Prisoner’s Dilemma” is all about.

This dilemma can be summed up in a decision to be made between cooperating or betraying a second person, who finds himself in the same dilemma. In the last 20 years, social experiments have proliferated where this same question is put to the test: under what conditions do we decide to play as a team or, on the contrary, to opt for the individual play. As a corollary: playing as a team can be much more efficient, however, it requires trust and credibility. From the experiments, it can be sensed that if the game is repeated many times over time, two things happen: we learn to play it and we cooperate more with others.

This theory explains a lot of crypto behavior, starting with the lack of trust in governments and traditional currencies. But, in addition, the possibility of assuming a high level of risk is more accepted when the game can be repeated in the future. Young people especially are driving the cryptocurrency craze, in part to take refuge from inflation, as their returns are measured in dollars. It is no coincidence that games have been developed that require capital to enter and that pay returns for playing. The Family Game generation will be thinking “what would my life be like if I had been paid in dollars to play Mario Bros?

However, cryptocurrencies paved the way for these video games. The top five, leading Axie Infinity, accumulate more than $ 20 billion in market capitalization. But it is a high risk market, with many changes. New NFT (Non-Fungible Token) games that are experiencing a boom also learned from this, such as CriptoMines, a science fiction blockchain project about space travel, which implements a system that pays returns in fixed dollars to provide stability. and forecasting to investors, called “Oracle”. However, NFT games are still a very recent phenomenon so it is too early to know if even using this mathematical model they can really be sustainable in the long term.

A world that travels at the speed of light, with high volatility and unsurpassed creativity. Although no one who has studied the financial structure of the derivatives of subprime mortgages in the United States (which broke out the crisis of 2009) should look with an astonished face.

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The Squid Game can explain the crypto world –