Has Cryptocurrency Driven a Rise In Personal Trading?

Twitter icon   • 5 minute read  •  Published 1 month ago  •  Mark Weaden

Companies are developing apps to ensure trading is more accessible and simplified. But, what’s drawing traders to digital currencies? And is cryptocurrency having an influence on personal trading?

During the pandemic, the number of people turning to stock trading increased dramatically. While one might speculate on the rising numbers as a result of the negative economic implications from the coronavirus, the truth is a big part of it was simply a way to seek out entertainment. There were sizeable increases in the number of traders using apps like Robinhood, which saw higher numbers—with 4.3 million daily average revenue in trades—of new users than major established wealth management firms like Charles Schwab.

The fast-moving fintech industry is changing the landscape of personal trading, providing easier access to markets through an innovative app design and educating users on the basics to give them the fundamentals to get going. While major cryptocurrency exchanges have been around for some years, the popularity of these apps soared during the pandemic coinciding with the growing interest from budding traders. A recent survey has shown that 1 in 10 people are investing in cryptocurrencies for the ease of trading. In fact, traders cited a variety of reasons for trading in crypto, these include the ease of making their own trades, the potential for short-term high growth, and that it feels like a game, among others. 

Companies are developing apps to ensure trading is more accessible and simplified. But, what’s drawing traders to digital currencies? And is cryptocurrency having an influence on personal trading?

Factors Driving an Increase In Traders

Technology has certainly played a major part in the rise of cryptocurrency trading. Smart applications have streamlined many of the complicated processes of trading. According to a recent CNBC/Momentive Invest in You survey, 34% of crypto investors buy and sell monthly, 33% weekly, and 24% daily. These kinds of figures show a desire and willingness to make potentially serious trades on a fairly frequent basis. As well as that, technology has opened up the door for the public to gain direct access to investment advice. It was found that 35% of 18 to 34-year-olds are getting investment advice from social media. Although the term “advice” may be used loosely. Investing in the stock market is an extremely complex venture, even more so when you’re dealing with the high volatility of the cryptocurrency market. Nonetheless, we live in an age of online influencers and their ability to coerce would-be investors into major financial decisions is attractive, so much so that it brings in new traders. 

Another influential factor brought about by social media investors and the growing attention given to crypto, is the “Fear Of Missing Out” (FOMO) concept. Investors are drawn in by the idea of making money with ease, which is a false flag in many ways. The volatility of crypto means users see their balance shoot up significantly in a matter of hours, but it can go in the other direction just as quickly, leading to the idea of making a quick buck. A symptom of taking advice online is a trend to overreact to private information and underreact to public information—a kind of mistrust in the genuine news information, in preference to Youtube or Reddit influencers’ personal takes.  

Another factor that has been brought about by the rise of trading platforms is the low transaction costs involved in spot trading. It’s true that many blockchain technologies are now providing a great deal of value. Cryptocurrencies don’t require brick-and-mortar to exist; a minimal number of employees, low figures for bills or utilities, meaning the associated costs for crypto exchanges to carry out trades are extremely low. One of the major costs for entry is the conversion cost from fiat currency to crypto, though this is something that is being tackled. On top of that, once you’ve converted to crypto, internal trades come with very low fees. 

There’s also never truly been a more prosperous time to get involved in personal investment. Through cryptocurrency investment, businesses and entrepreneurs in every continent across the globe are able to transfer funds almost immediately, liberating small and medium-sized business owners from the negative aspects of working with banks and intermediaries. The global scale of crypto creates an ecosystem of social and financial inclusion. As such, it’s only a matter of time until cryptocurrencies influence the lives of every person, which will see everyone given the opportunity to purchase and trade. 

Looking Forward to the Future of Trading 

There are various blockers affecting investment firms and banks from setting up crypto-based portfolios for clients, which has, in part, driven the prevalence of personal trading. However, if we were to see regulations change, professional investors should design investment strategies to tackle the volatility of major cryptocurrencies. Although it may be a lot of fun to stake money in personal trading, for the uninformed and misinformed, it’s essentially gambling. The development of strategy would provide the public with properly managed risks and avoid potentially large financial losses.

This isn’t to say that investing through third parties is a necessity in the long run. The benefit of cryptocurrency trading platforms is that everyday users now have the means to manage their own finances, through trading, purchasing and electing in which asset to hold their funds. There is a wealth of crypto exchanges to choose from and we are only likely to see the quality of service improve over time. We are now also seeing companies like BlockFi and Nexo, which offer free trading among major coins like Ethereum, Bitcoin, Tether, and many others. These companies offer fewer coins for trading, but much higher APY (annual percentage yield) for coins stored with them—operating in a similar sense to a bank. The mainstream adoption of crypto will be concurrent with the development of the exchange ecosystem. Ergo, we can expect to see a steady stream of new traders, and not just for the crypto asset class. 

Author

Mark Weaden

Mark Weaden is a British researcher and crypto enthusiast, living in Barcelona. His work has been published on a variety of leading cryptocurrency sites.

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