When people imagine the atmosphere at financial institutions operating on Wall Street they usually think of something akin to what was depicted in the Wolf of Wall Street. However, to become a full-fledged stockbroker and start charging for it you have to pass exams and get a special license. It’s an intense job that requires a certain set of financial knowledge and the capability of closing tough deals while handling immense amounts of stress. Accordingly, traditional equity markets are regulated by governmental institutions and have a high entrance threshold.
With Bitcoin standing at the forefront, digital assets powered by blockchain technology were designed to level the playing field of global finance as well as a hedge against centralization by lessening the participation of third parties in financial transactions and even drive fiat money out of circulation. Over the years of crypto’s existence, it has paved the way for anyone with an internet connection to have the opportunity to make a fortune. Until fairly recently, there was no means of creating wealth if you didn’t possess a significant amount of initial capital as a good springboard. But luckily, this is no longer the case.
Blockchain gave people a chance to circumvent annoying banking bureaucracy and closed-door monetary policy that favors the wealthy to the detriment of all others. In addition, eliminating existing intermediaries enabled crypto holders to bypass the burdensome fees, interest rates, and other restrictions imposed by traditional financial institutions. As it stands now, crypto hasn’t decentralized finance yet, but it has perhaps democratized it, at least in the trading world, in a similar fashion to the way the emergence of the internet democratized content creation.
Lack of regulations intensifying crypto trading
The crypto world apart from Wall Street is scantily supervised, meaning that traders and investors have almost no legal protections. Paradoxically, this doesn’t deter people from the market but has quite the opposite effect due to its current availability. Yes, there are many large funds making waves in this sector, but, except for that, there are millions of average traders working right from their homes and profiting from cryptocurrency price fluctuations. The rules applying to stocks are not valid in crypto. While normal brokers can examine the reality behind the valuation of a given asset and make a decision, crypto traders believe that cryptocurrencies go up and down only because there are people who buy and sell them. No exams, no licenses, no relevant education… It's pretty appealing for those who want to get a taste of trading and a shot at increasing their income
Many amateurs are flocking to cryptocurrency exchanges, the majority of which are unregulated, to trade on the market’s short-term twists and turns instead of waiting for long windfalls. And they are doing it completely anonymously. During the registration process, customers’ private data is not gathered. It’s enough to create a username and enter an email address to get access to trading platforms. There’s no bureaucracy standing in your way, all you need is talent and ambition to succeed in this sphere that was previously exclusive for professionals.
But isn’t the crypto gray area considered to be an appealing advantage for retail traders to trap big investors? Remember Jordan Belfort’s firm in the Wolf of Wall Street, “Stratton Oakmont,” which was engaged in rampant corruption and pump and dump schemes where prices were artificially inflated through misleading positive forecasts? If such fraud occurs in traditional markets, how can investors trust their funds with crypto exchanges that lack strict external control? As for now, the crypto market remains highly manipulated, which makes emerging money scams more the rule than the exception. Vulnerability to hacking attacks is another weak point that is a source of dismay for those questioning whether they should dip their toes in the waters of crypto trading. However, there are several entities that have managed to resist such hacking attempts and stay as reliable as traditional financial institutions. HitBTC, Kraken and Huobi represent the old guard of crypto exchanges and are places where institutional investors can feel safe with Know Your Customer (KYC) procedures implemented to prevent any fraudulent transactions. It wouldn’t be a mistake to suppose that the first exchange is among institutional favorites, also given its fixed withdrawal fees and flexible trade rates which are both beneficial for high-volume trading. While HitBTC provides access to the largest amount of crypto spot markets in the industry, Kraken and Huobi are contributing to the maturation of digital assets by offering more advanced trading instruments like crypto derivatives.
Anyway, the opportunities that the cryptocurrency sector gives to people willing to become traders or investors can’t be ignored. The extension of the crypto market participants buying and selling crypto has led to the formation of predictable patterns displayed via different charts available on crypto exchanges and data aggregators. People use these patterns, hunt for signals or advice on Reddit, Twitter and Discord and copycat the successful moves of other traders. And what’s far more fascinating, is that all these actions can be automated just like in traditional finance with the help of special programs.
Increasing wealth with crypto bots
Although automated trading is nothing new, it significantly simplifies the entrance to the crypto space and, to some extent, educates novices showing them how to execute the best possible trades. Today’s offering of trading APIs has made the crypto bot market more diverse than ever before and gives users a wide range of options for earning large sums of money with minimal time and effort. At present, more than 7,000 bots are operating in the crypto space.
Trading bots are capable of executing thousands of complex transactions per second thanks to their ability to make computations millions of times faster than the human mind can. This significantly increases the likelihood of profit, as even the smallest trade that was done in large volumes can result in multiplied gains. Bots easily adapt when something goes wrong, self-optimize to make the best out of any single task and implement the latest technologies filling the market. What makes them even more valuable for humans is that bots don’t need to eat, sleep and socialize. They are active round the clock and do exactly what they were programmed to do — accumulate returns without any of the feelings and emotions that so often lead to mistakes. Cryptocurrency charts are rather sensitive to these emotions as well and can be driven by everything from overconfidence and greed to anxiety and fear. Trading bots are absolutely immune to this, which is particularly useful for beginning traders.
The fact that each crypto trader can buy a bot also contributes to the prosperity of cryptocurrency trading. Like most crypto exchanges, trading bots are unregulated, meaning that there is no third-party monitoring of their activity. This is great in terms of privacy but worrying when it comes to illegal actions. This component needs to be improved so mechanical crypto trading systems can be implemented on a large scale, like what has happened with the US Stock Exchange where around 75% of trades are executed automatically with no human interference.
Tokenized assets are key
The crypto industry has been incorporating trading tools that are prominent on traditional capital markets for some time now, but what is happening now, in a process accelerated by Covid-19, is that traditional markets are exploring the effectiveness of blockchain and crypto solutions. In 2019, over half of the American population owned stock. An impressive number, taking into account that today, investment in whole securities is primarily limited to people with a solid income. But this doesn’t mean that more than half of Americans have suddenly become millionaires. It’s all about tokenization or, to put it in layman’s terms, adapting financial instruments to blockchain technology.
Tokenization is the process of digitizing major asset classes with the opportunity of subsequent division into distinct shares in a form of token on the blockchain. These single tokens can be traded like other cryptocurrencies or distributed to a greater number of investors at lower fees to provide them with better exposure to the market with higher liquidity and accessibility. Buying just a fraction of an asset is more affordable for average individuals willing to invest even if they don’t have large sums of money to do it with. With tokenization, investors of all types and sizes are welcome to take part in managing their investment opportunities in accordance with their financial ability. The only thing required is a good internet connection.
Tokenization also offers greater security and transparency, which are initial ideals of blockchain technology. All transactions are recorded on the blockchain, which makes them immutable, so as soon as an investor purchases tokens, their ownership is fixed and broadcasted publicly.
With all the aforementioned advantages, there is every indication that the number of Americans holding stock will grow steadily as tokenization spreads. Moreover, this process may become a cure for businesses and supply chains struggling to adjust to the post-Covid-19 reality.
The new frontier in trading
Undoubtedly, crypto has forced people to look at currency trading and market regulations in another way. Due to its convenience and wide range of intermediary-free earning opportunities it has become the talk of the town for working in finance and technology.
Regardless of what will happen with Bitcoin and other cryptocurrencies in the future, they have already given more people a chance to participate in capital markets and stay afloat. Owing to the severe Covid-19 health and economic crisis, which crashed equities, locked us at home with no wages and made a huge number of people unemployed, there is no more ideal time to enter the crypto industry and learn how to advance your financial situation using digital assets.