Defying Crypto Winter: Transaction Volume Strong in Crypto Casinos
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The cryptocurrency market has faced its fair share of challenges in recent years, with the prolonged “crypto winter” of 2022 resulting in the collapse of several major players, such as LUNA, Celsius, and FTX. Despite these struggles, certain sectors within the crypto industry have managed to thrive, including online crypto casinos.
One such casino, Stake.com, has managed to defy the odds and maintain strong transaction volume despite the challenging market conditions. In fact, a recent report found that 6% of Bitcoin transactions were wagered on Stake.com worldwide in December 2022. This report will delve deep into crypto casinos and the factors that helped them weather the recent downturns in the crypto market.
The rise of crypto gambling
History has shown that any invention will find use outside its intended purpose. For example, gunpowder wasn’t initially created for warfare, but following a supposed freak accident at an alchemist’s furnace, people saw its lethal potential.
Cryptocurrency is no exception, with the first crypto gambling service, SatoshiDice, introduced in 2012. A clear homage to the inventor of the world’s first cryptocurrency, Satoshi Nakamoto, SatoshiDice is a simple online casino game that involves picking a number. If the automatic dice rolls a number less than the player’s number, the player wins.
Given that it was released three years following the birth of Bitcoin, the game grew popular fast. Although legal issues forced the game to restrict US-based players, it laid a stable foundation for a flourishing industry. A report by Switzerland-based blockchain development firm ICON stated that a quarter of all global gambling transactions last year involved crypto.
Experts stress that crypto gambling isn’t a new form of gambling, as the only difference is in the medium of exchange. This doesn’t make it any less significant, as gambling researchers from the University of Sydney suggest.
First, most crypto casinos maintain a lower house edge than their brick-and-mortar counterparts, as low as 1.9%. Although the figure is no guarantee (refer to the gambler’s fallacy), knowing a casino’s house edge is crucial in safe gambling. Because of the low house edge, winnings from crypto gambling can be more significant than those from traditional gambling.
Adding to the higher return to players is the reduced transaction costs or a lack thereof. Such fees depend on the gateway, but industry experts estimate them to start at 0.5%. By comparison, cash advance fees (ones that charge a percentage) are usually between 3% and 5%, while interest rates in credit cards have an average of roughly 24%.
Since its inception, reducing transaction fees has been one of the crypto market’s major goals. A high fee will undeniably cut into a person’s crypto investment, especially if it costs as much as their take-home pay wherever they live. This goal was primarily made possible due to advances in mining technology, from improved data compression to zero-knowledge rollups.
Apart from reduced costs, improvements in crypto have also made cashing out in crypto casinos much faster. Whereas cashing out via conventional means (e.g., wire transfer) can take between three and five business days, the time for cryptos is typically measured in hours, if not minutes. Below are the average confirmation attempts and required time for inclusion in the first block of some cryptos as of this writing:
- Bitcoin – 3 confirmations in 40 minutes
- Dogecoin – 40 confirmations in 40 minutes
- Ethereum – 70 confirmations in 14 minutes (ETH-20)
- Litecoin – 12 confirmations in 30 minutes
- Ripple – No confirmations noted, near-instant
- Tether – 20 confirmations in 2 minutes (TRC-20)
Confirmations are indispensable in securing crypto transactions, though there’s no exact number required to make them completely secure. As crypto casinos handle amounts by the thousands, it isn’t unusual for their transactions to need more than the number listed above.
Lastly, while not directly related to crypto, the popularity of crypto casinos is attributable to live streams, one example being Stake. The online casino gained notoriety in October after Twitch banned online gambling streams on their platform. The ‘slots’ category was consistently a top ten category on Twitch, where streamers would play slots on websites like Stake and other online casinos—especially with cryptocurrencies.
A harsh winter
Amid such successes, many crypto holders have expressed concern about recent developments in the crypto market. While this year opened with Bitcoin’s value returning above the USD$20,000 mark, it’s roughly half what it was last year. Market data from CoinDesk shows that Bitcoin has struggled to recover throughout most of 2022.
Because every altcoin’s roots can be traced back to Bitcoin, anywhere its value goes, so do the altcoins. There are moments when Bitcoin and altcoins move the opposite way, but such trends are extremely rare. When the former occurs for a long time, the market enters a “crypto winter.”
The latest winter has been exceptionally harsh. Analysis of around 13,000 cryptos being traded in over 800 exchanges by CoinGecko revealed that total market capitalization had tanked by as much as 65%. The situation has slightly improved come 2023 but remains precarious.
Market analysts agree that a series of crashes is to blame for this crypto winter. In May 2022, the stablecoin TerraUSD, pegged at exactly USD$1.00, lost over 90% of its value within a few days. Around the same time, its sister crypto Luna also crashed and burned.
It’s estimated that the crash resulted in a loss of USD$300 billion across the crypto board. People lost their life savings, and two hedge funds—Celsius Network and Three Arrows Capital—filed for Chapter 11 and Chapter 15 bankruptcy, respectively. The cryptos’ founder, Do Kwon, and executives have since gone into hiding, with some being issued arrest warrants.
But as the market reeled, crypto trading firm FTX filed for Chapter 11 bankruptcy in November 2022 (including its U.S. affiliate, FTX.US). In an interview with The New York Times, former CEO Sam Bankman-Fried blamed the collapse on slapdash accounting and poor decisions on the part of its trading arm, Alameda Research. Bankman-Fried is currently facing multiple charges.
Similar to an actual winter, a crypto winter will be followed by a crypto spring—as in a spike in investor confidence. However, there’s no telling when the market will be favorable. The last crypto winter lasted between January 2018 and December 2020, 23 months in total, and today’s winter persists amid Bitcoin’s improving value.
Largely unscathed
On a positive note, the winter has barely discouraged lucrative collaborations from pushing through. Recently, the Premier League signed a GBP£30-billion (USD$36.13 billion) four-year deal with the crypto fantasy soccer game Sorare. Another example is Stake’s USD$100-million three-year deal with Alfa Romeo’s Formula 1 team.
Overall, the market remains bullish for crypto casinos, with one report estimating a compound annual growth rate of 11.49% over the next three years. While it’s too early to tell if the actual growth will be consistent, it’s safe to say that crypto casinos have withstood the crypto winter largely unscathed. But why is that?
It’s impossible to nail down one specific reason, but it’s safe to say that social media influencers have a hand. Gambling products and services aren’t exactly noticeable compared to clothing and groceries, among other things. According to a YouGov survey published last November, only a fifth of people worldwide notices such endorsements by influencers.
But once you focus on individual countries, the story becomes somewhat different. For instance, nearly half of the respondents in India said they noticed these endorsements, compared to 13% in the U.S. and 6% in the U.K. Age is also a factor, with the majority being between 18 and 34.
In spite of this, influencers draw people to gambling—particularly in crypto casinos—in droves. As mentioned earlier, gambling streams were all the rage on Twitch before the platform banned them last October. Data from Twitch stream trackers SullyGnome and Streams Charts shows that the Slots category alone reached around 300,000 total views and 45 million hours viewed in July 2022. Many considered that time to be the height of gambling streams.
Whether or not there’s something that makes watching people blow millions in games of sheer luck appealing, their role in popularizing gambling is undeniable. One household name is Tyler Niknam, known by his Twitch handle “Trainwrecks.” In April 2022, he made headlines after winning USD$22.5 million in the slots game Might of Ra in his second of 15 free spins.
Outside of being one of the largest wins in online gambling history, similar big-ticket jackpots entice viewers to try their hand at playing. Even though Trainwrecks constantly warns his fans about the equally-substantial losses that come with gambling (he only had 0.08 Bitcoin left at that moment), he’s already shown people that anyone can win big.
However, to say that influencer gambling is a 21st-century thing isn’t entirely accurate. Some casino games like poker have attracted thousands since the 1970s, thanks to competitive play. Tournaments like the World Series of Poker and their massive prize pools are just as enticing for people to make a career out of it as contemporary streams.
Payment, not investment
The debacles involving TerraUSD, Luna, and FTX are undeniably unfortunate and will lead to a temporary loss of confidence in the crypto market. However, the crypto gaming industry believes such incidents won’t spell the end for the practice of wagering with crypto.
In an interview with Gambling Insider, Crystal Wealth Group CFO Mike Fox likened the recent crypto setbacks to those during the pre-Google years of the internet. Similar to the latter, these crypto crashes and shutdowns resulted from bad business decisions and slipshod management, which can happen to any business venture.
If anything, their exit from the crypto market means fewer outright scams to fall for—hook, line, and sinker. For most of its life, crypto’s growth has been hampered by unscrupulous individuals or groups taking advantage of the craze. A Federal Trade Commission report stated that crypto scams had inflicted losses of over USD$1 billion since 2021.
Crypto’s decentralized nature meant that the currency lacked a regulatory institution to oversee its trade. Unlike conventional investments, crypto investors have little recourse when things go south. That’s why lawmakers have quickly laid the foundations for regulations over the years.
Yet, this nature also allowed crypto to thrive, according to Fox. Blockchain technology spreads transaction information over a network of terminals; no single terminal has the entirety of such information. Crypto casinos and their player base benefit from this, as winnings are less prone (but not completely immune) to interception by hackers.
More importantly, other industry leaders believe that crypto has come too far to fall out of use. They argue that crypto gambling treats the currency as a form of payment than an investment. Amid the loss of confidence, people won’t stop using crypto anytime soon, as it’s already too entrenched in today’s financial system.
Nevertheless, crypto’s volatility should remind crypto casino players to keep their financial wits about them. The hundred dollars you spend per spin in the slots may or may not be worth a spin, depending on the crypto’s current value. It pays to be aware of developments in the crypto space, whether or not you’re an investor.
As for responsible gambling, crypto more or less follows the same rules as conventional ones. Professional help sites such as Be Gamble Aware and the Responsible Gambling Council urge players to follow these tips:
- Refrain from gambling when physically or emotionally stressed
- Refrain from treating gambling as a viable way to earn on the side
- Set a time limit and budget and follow them to the letter
- Resist the temptation to win back everything you lost
- Stop playing if the game is no longer fun for you
- Use site blockers and other apps to help with self-control
Conclusion
While the crypto market has faced its fair share of challenges in recent years, certain sectors, like crypto casinos, have managed to thrive despite the “crypto winter” of 2022.
The adoption of cryptocurrency for online gambling and the diversification of offerings have been key factors in the success of casinos like Stake.com, which have maintained strong transaction volume despite the overall struggles of the market.
