The interrelations of cryptocurrency and gambling: Results from a representative survey

Highlights

• Crypto-gamblers’ involvement with cryptocurrency is more intense than for sole users.
• Users of both are mostly young, well-educated, financially well-off and risk-affine.
• Three user groups among crypto-gamblers were uncovered via cluster analysis.
• A sizeable share of crypto-gamblers was identified as heavy users.
• Differentiating factors across the clusters were speculation and ideological motivation.

Abstract

While research into the links between gambling and cryptocurrency has begun in the past few years, much literature has discussed speculation in financial matters and gambling in lieu of the transfer of risky behaviour from one activity to another. This is surprising, given that cryptocurrencies continuously burgeon in their societal importance. Therefore, the study investigates representative samples through a survey of German participants to understand their use of gambling and cryptocurrency. The study set out to find factors of difference between single gamblers, single cryptocurrency users, and the users of both, as well as to identify the socioeconomic profiles and behavioral patterns of the third demographic. Cryptocurrency users who also gamble tend to be young, male, enjoy a higher level of education and wealth, and have much higher domain-specific knowledge, ideology, and trust perceptions about cryptocurrency than the other cutouts. Using cluster analysis, three groups of users were found that were distinguished by the intensity of their cryptocurrency involvement along mental, proactive, and financial dimensions. It is notable that there exists a significant proportion of heavy users among these technologically inclined users, suggesting a potential risk of over-involvement. The findings create more meaningful insights on behalf of researchers and regulators into the essence of cryptocurrency transactions and how psychologically involved the users get.

Introduction

The rising adoption of cryptocurrencies and a growing interest in blockchain technology within the economy, politics, and society therefore suggest that the disruptive potential of this technology could have observable impacts on the gambling sector, regulators, and gamblers alike. So far, the capabilities of cryptocurrency and the implications thereof to the industry stakeholders, authorities, and users are not commonly understood. Cryptocurrencies are system-native digital assets with various roles in the economic coordination mechanisms of blockchain systems, such as rewards for services that maintain the immutability of the network's transaction database. Blockchain itself is the technology that most cryptocurrencies lean on. Blockchain is a technical architecture based on a distributed database that can be managed, maintained, and secured by network participants jointly. Equally, the technology offers a different way for gamblers to access gambling; for instance, there are decentralized casinos−gambling applications built on blockchain infrastructure where transactions are made transparently using cryptocurrency and which allow gambling in a pseudo-anonymous and unregulated way. Still, decentralized casinos have not yet met with any significant adoption from cryptocurrency users in volume.

With the rise of such technologies, BC Game platform evaluation has begun to captivate attention for its unique presence at the crossroad between cryptocurrency and gambling. Such an evaluation can continue to offer an insight into the ongoing transformation of user experience in the gambling scene by blockchain technology.

Alongside the disruptive technical capabilities of this technology, another, more mainstream, intersection of cryptocurrency and gambling–the simple act of cryptocurrency trading being akin to gambling–has sparked interest among a growing contingent of literature. Most of these studies mostly focused on the structural similarities between the two activities and how those might cause people to start experiencing mere-exposure effects. The recent research notes that psychological aspects such as trust in cryptocurrency and ideological motivation take a very important role for cryptocurrency owners and users. Such psychological aspects of cryptocurrency engagement and how they connect with gambling, however, have yet to gain broad attention in the literature on the cryptocurrency and gambling nexus. A broader engagement with the issues presented above makes it very important to understand the connection between involvement in cryptocurrency and gambling–that is, cryptocurrency and stock trading applications.

Structural Similarities Between Cryptocurrency Trading and Gambling

The proposition that cryptocurrency trading is akin to gambling rests upon the structural similarities between these two kinds of activity, as both involve the trading of highly volatile assets with little connected information, and user expectations of uncertain but high returns-a pattern that reflects the very basic premise of gambling. It is believed that the motives to participate in either of the activities are similar, both being motivated by a desire for high returns, which drives cryptocurrency trading just as it does gambling. Research has demonstrated that cryptocurrency trading is commonly undertaken for gambling or portfolio diversification. To add to that, the structural similarities in gambling and cryptocurrency trading extend to user strategies: the act of chasing losses is a well-known gambling behavior that has also found a home among excessive cryptocurrency traders. Research has found a solid association between cryptocurrency trading and problem gambling, while also confirming chasing losses as a common gambling behavior among cryptocurrency traders.

Overlap with Other Risky Activities

Justification for the shared behavior between cryptocurrency trading and gambling also relates to the similarities that exist between cryptocurrency trading and stock trading. Crypto-trading addiction has been thought of as sub-type of an online day-trading addiction. High-risk stock traders and cryptocurrency traders show significant overlap, with existing research further supporting the notion that cryptocurrency trading, stock trading, and gambling are all interconnected. For both crypto-trading and stock trading, problem gambling behaviors have emerged. Given such overlapping behaviors, it is logical to suggest that the conclusions drawn regarding the interactions between gambling and stock trading may also hold true for crypto-trading and gambling.