So if the argument is that markets are efficient, there shouldn’t be any crashes, right? And the counter argument is that regulation causes the crashes but if the markets are truly efficient shouldn’t they still be efficient even in a regulated market?

I mean all the information is still available even in a regulated market, isn’t it. So why aren’t they efficient

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@wxcafe to answer the question seriously:

efficient markets hypothesis doesn’t just require everyone to be able to have all of the information

it requires everyone to actually have all of the information, and that isn’t the case

…and it requires everyone to act rationally on that information (and computers even fail this)

…and also to not act maliciously (regulation is supposed to solve this but the regulators are refusing to enforce their own regulations on this)

…and none of this is true

…and then there’s cases where market participants actually can’t get information because it’s actually not available to the market (basically nobody could have known about COVID before November, but by March, it caused a crash, as an example), and a crash/spike happens because the information becomes known

@bhtooefr yes but if you assume it’s true, it should work the same in a regulated market as it does on an unregulated market

@wxcafe only if everyone has information on everyone that’s trading, who they are, and when they’re trading when it happens

then maybe you could, if you have rational actors with all information, route around the malicious manipulators

but you will never have a market solely consisting of rational actors, and it’s impossible to have all the information, so efficient markets are impossible on that alone

@bhtooefr yes I know the theory is bullshit, what I’m saying is that even if you accept it as truth it still doesn’t make sense to justify crashes as a result of regulation

@wxcafe yeah, agreed

and crypto markets could be used as an example of that - there’s regulation but it’s almost impossible to enforce outside of taxation on market participants’ profits, and most cryptocurrencies don’t even have much information to trade on, it’s purely technical trading, and they still have crashes

That's the thing, markets aren't and can't be efficient because it's impossible for any parties involved to know everything there is to know when that knowledge is needed (that is, before the price moves for such and such reason). You will always have a surprise central bank decision, insider trading, fear, manipulation, loss of supply, etc. And that's precisely because markets aren't efficient that traders can play them and make money.

@caml yes I know, I'm making the point that even provided it was true, regulations wouldn't be the thing that causes crises in the system

Indeed 👌Regulations certainly slow down the sudden crash moves. But the big whales playing the markets need and help these moves happen as it serves their purpose. That's why they campaign against regulations with bogus arguments. That's probably what you meant from the start but I think it's important for the general public to understand it.

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