The advent of cryptocurrency created an exciting opportunity for ordinary people to access the massive returns linked to financial trading. Traditional financial markets are typically only available through institutions such as hedge funds, which require minimum investments of more than $100,000 to participate. 

Cryptocurrency has enabled retail investors to earn four- and even five-digit percentage returns with only internet access. However, with great reward comes great risk. Because of the market's volatility, it is prone to violent crashes. For example, the market lost $2 trillion in value in the first half of 2022.

Much of this can be attributed to TerraLuna's demise when the UST stablecoin plummeted to nearly nothing, as well as Celsius' financial difficulties and bankruptcy. These and other events contributed to the grim market situation that investors would have to navigate.

If we restrict retail investors' access to returns, we risk breaking crypto's pledge of democratizing finance but instead creating a financial market 2.0 in which only the wealthy can participate. Furthermore, if we keep operating under a centralized system, we risk a single point of failure, resulting in the same market crashes that we have just witnessed.

So, what can be done to ensure that retail investors progress to have access to the lucrative yields available from trading cryptocurrency?

To respond to this question, we must first ask: What challenges do retail investors face?

Becoming increasingly difficult to comprehend

The amount of data available to investors has grown in tandem with the growth of cryptocurrency. To trade effectively, investors must examine a wide range of data, including transactions, order flow data, wallet-to-wallet transactions, transaction cost, and the volume of currency traded at any given time. 

While this data is easily accessible, combining it to analyze it is ineffective. This is why companies like Nansen.ai, which analyzes on-chain transaction data to assist traders' decision-making and blockchain forensics, are recognized so highly — Nansen.ai itself is valued at US$750 million.

The requirement for all of this makes it very difficult for retail investors who lack access to specialized tools or datasets to make sound investment decisions. Instead, they make decisions based on blogs, news articles, other investors, and influencers. However, this only gives them access to a subset of the information needed and, in some instances, contradictory information.

Ordinary investors face a second hurdle: the market is open 24 hours a day, seven days a week. Generally, the traditional financial market only opens from 9:30 a.m. to 4 p.m. on weekdays, allowing hedge funds and successful traders to maintain a normal working schedule. However, investors risk losing money because of the uncertain nature of the cryptocurrency market.

Trading without assistance is risky and unrealistic for the average investor with commitments such as work and a family to care for.

Do you think the crypto industry is doing enough to help ordinary investors? Let us know your thoughts by sharing this article on social media.

Posted 
Oct 29, 2022
 in 
Digital Lifestyle
 category

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