It’s no secret that crypto is currently a highly volatile currency, which could potentially be a double-edged sword for crypto casinos. In this article, we’re looking at exploring how this volatility affects operators, how they manage financial risks, and what impact this ultimately has on us, the players.
How crypto volatility affects the online gambling industry
This is a rather interesting topic, as crypto casinos are affected in similar ways to regular consumers when it comes to crypto volatility. Of course, such rapid fluctuations in value can either benefit a casino operator, or put them at a disadvantage.
Volatility is part of what makes crypto gambling exciting and attractive. It’s high-risk, high reward, and players will try to maximize their investment by visiting crypto casino sites, which can be viewed as beneficial for the operators.
On the other hand, these casinos need to manage financial risk due to the dramatic fluctuation that comes with cryptocurrency in its current state.
Strategies for managing risk
There are a few strategies that crypto casino operators employ to manage financial risk. Let’s take a closer look at each strategy for risk management currently commonly used by many companies.
- Hedging – This involves taking offsetting positions in the market to mitigate the risk of price fluctuations. For instance, a crypto casino that accepts crypto payments may also short-sell coin futures to offset the risk of a decline in value.
- Stablecoins – These are cryptocurrencies that are pegged to the value of a stable asset, such as the US dollar. They provide a more stable form of payment than traditional cryptocurrencies. As a result, they help crypto casinos to avoid some of the volatility.
- Realtime conversion – Crypto casino operators can convert cryptocurrencies to fiat currencies as soon as they are received. This helps them manage some of the volatility risks, but it also means that they do not benefit from any increases in the value of the cryptocurrency.
Our analysis shows that different crypto casinos will opt for different approaches when it comes to risk management. For instance, a couple of casinos have chosen to only accept stablecoins, such as USDT, in addition to fiat currency. Some will accept other coins like BTC, ETH, LTC, and similar but leverage real-time conversion to minimize volatility.
The impact on players
Lastly, we’re examining the impact that this volatility has on crypto gamblers, as it’ll unavoidably affect the player experience. While some of the general risks can be mitigated by having a sense of timing, there’s one main thing you’ll want to note when visiting a new crypto gambling site.
Some casinos convert the coins you deposit into fiat currency when you add funds to your casino account balance. This means that while your funds are locked into your account, they’ll not be affected by any fluctuation until you can withdraw them.
Research summary
We like to remind ourselves of the impact crypto volatility can have on the online gambling industry, specifically crypto casinos. Operators will use various strategies to manage risks, including hedging, using stablecoins, or converting cryptocurrencies to fiat currencies in real time.
We’re also noting that this volatility can affect the player experience too, with the potential (or risk) for unexpected gains or losses. Ideally, you should be aware of the volatility of cryptocurrency and the risk management strategies of the crypto casinos they use.
Hopefully, this article has helped you gain some insight into the industry and understand how crypto affects the casinos we enjoy visiting.
Sources and references
- https://business.gov.au/risk-management/risk-assessment-and-planning/assess-and-manage-risk
- https://www.investopedia.com/terms/s/stablecoin.asp