What is Game Theory

The dictionary definition of game theory is the study of mathematical models which describe the strategic interaction among rational beings. These rational beings can be people, firms, machines, software, etc. In this case, the rational beings are nation states. Game theory can be applied to all fields of social science, as well as many other fields of study. Game theory originally addressed two-person zero-sum games in which the participant’s gains or losses are exactly balanced by that of other participants, which is why it’s so incredibly relevant in mathematical economics.

How Game Theory is Applied to Trading

At the most fundamental levels, all trading strategies are derived from game theory. Game theory gives economists and statisticians the tools needed to mathematically prognosticate the markets when they’re erratic. As game theory provides a framework for understanding situations among competitors, it is a valuable tool for making optimal decisions in a strategic setting.

Game Theory and Bitcoin Adoption

History has always demonstrated that capital flows to where it’s most welcomed. When it comes to Bitcoin being recognized as legal tender, even places that don’t believe in it will be forced to follow suit by accumulating Bitcoin, either by purchasing it or by mining it; the latter being the more likely scenario. Nation states that accumulate Bitcoin now will be at an advantage compared to their peers. It wouldn’t be too much of a surprise to see another country recognize Bitcoin as legal tender within the next year.

No matter how much adoption takes place, 2022 will likely continue to be a great year for both Bitcoin and cryptocurrency as a whole!

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