Crypto charities can exploit ‘gambler’s fallacy’ to reap larger donations — Study
A team of academic researchers from the United States recently published a study exploring how the “gambler’s fallacy” affected cryptocurrency donations. Their findings indicate that organizations accepting crypto donations could benefit from timing the market.
Essentially, the team’s work explores the idea that people generally misinterpret certain pattern signals when it comes to finance. Charities that understand the penchant for crypto holders to hold or move assets based on perceived market conditions may be able to optimize their strategies to reap larger donations.
Per the paper:
The team tested their premise through an empirical study of cryptocurrency donations to 117 campaigns at an online crowdfunding platform. They also conducted a controlled online experiment studying features of cryptocurrency donation context.
After careful analysis, the team determined that market movement was directly correlated to donation “activation” (first-time donations) and donation sizes.
According to the paper, the online experiment expanded on the empirical analysis and demonstrated that “donors’ decisions are affected by recent changes in asset price, consistent with the gambler’s fallacy heuristic.”
The gambler’s fallacy, also commonly called the Monte Carlo fallacy, refers to the tendency for people to misinterpret statistically meaningless historical events, such as the flip of a coin, as a predictor for future odds.
As an example of the gambler’s fallacy, if a person flips a coin 10,000 times in a row and it lands on heads each time, an observer might think that the next coin flip has a higher chance of landing on tails because, as the above video explains, “it’s due.”
In reality, the odds of a coin landing on heads or tails
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