The Fallacy of Believing that Crypto is a Zero-Sum Game: A Deep Dive

As we experience yet another bear market, the classic statement that “crypto is a zero-sum game” has once again been heard. This statement implies that investors in cryptocurrencies win at the expense of others, so the net change in wealth or benefit is zero. However, in this article, we’ll explore the reasons why we believe that the “crypto is a zero-sum game” statement is false and misused.

First, let’s look at the concept of a zero-sum game. Investopedia defines it as a situation in which one person's gain is equivalent to another's loss, and as a result, the net change in wealth or benefit is zero. The idea behind this concept can be expanded to various other aspects of life, including sports, politics, wars, job interviews, and businesses. For instance, in sports, there is usually a clear winner and loser, and the same applies to wars, where only one country emerges as the winner.

In the cryptocurrency space, cultism often plays a predominant role, with Bitcoin Maximalists, Ethereum enthusiasts, and XRP supporters, among others, vying for the supremacy of their preferred cryptocurrency. However, society thrives on progress, and civilization has evolved over the centuries, with multiple people benefitting from its expansion without necessarily hurting others.

From a finance perspective, trading and investing may appear to be zero-sum games since people profit from others' losses. Nevertheless, a broader view shows that markets often expand as new money pours in, despite events. Strong assets purchased at higher prices have also profited from this concept of the "greater fool," which means that someone can make money by buying an asset even if they overpay for it, as there will always be another person willing to pay more (the "fool") down the line.

To illustrate, let’s consider Apple, which went public on December 12, 1980. While there were cases where investors lost money, the majority of its life cycle saw investors coming out ahead, indicating a not zero-sum investing game. Other companies might have come out as "losers" in the plot, but this has not led to worse communication. Instead, society is now more interconnected than ever before.

The cryptocurrency/Web3 space is growing exponentially, and all of the metrics involved suggest massive and steady growth. While the crypto industry is still small in terms of usage and global adoption, the number of transactions is on the rise. Although there are still issues, the industry is maturing and expanding, not stagnating. When we compare where things were centuries ago to today, we can see how this has transformed society, with standards of living higher across the world.

In conclusion, while investing in cryptocurrencies may appear to be a zero-sum game, it is not necessarily the case. Instead, the cryptocurrency industry is growing steadily, and investors can profit even when they overpay for assets, thanks to the "greater fool" principle. In other words, crypto is not a zero-sum game but an overall growth of a sector/industry. While some projects may fail, the cryptocurrency space is not a Ponzi scheme, and it continues to mature, expand, and thrive.