In a conversation with Blockchain Advisor, David S. Waslen, the CEO and Co-Founder of HedgeTrade, shares his thoughts about the current state of cryptocurrency markets and his vision for social trading in 2020
What are some current trends that are directly influencing the crypto industry in 2020?
During 2019, we saw some massive projects being built out, including exchanges, a multitude of new crypto wallets, and more infrastructure for decentralized finance (DeFi) applications. In addition to that, you have all these blockchain-based companies really pushing education in the space, with blogs, academies and all kinds of resources being created to bring everybody up to speed.
Because of this foundational work, 2020 will likely see a greater adoption rate of cryptocurrencies, even though we are still at the early stages. I think we’ll also see a lot of crossing over by companies in traditional finance, since now there is more infrastructure, a little less volatility, and crypto companies sprouting up that serve institutional clients.
What’s interesting is that a lot of these projects, including HedgeTrade, are able to cater to individual investors on a global basis, but they also provide data that may be used by anyone, from fund managers to an accountant who likes to manage his own portfolio. Since all crypto data runs on immutable blockchains, the data is open and available in real-time, 24/7. One of our main goals is to create innovative financial tools using this type of data, that help hedge risk and increase profit potential.
Will mainstream finance move into crypto and what would that look like?
2019 saw Bakkt and LedgeX, among others, dipping into the cryptocurrency derivatives arena, something a lot of people think will help foster adoption within traditional finance. While regulated exchanges like these are a little slower to innovate compared to BitMEX, for example, we are definitely seeing progress.
Another important segway to mass adoption is all this discussion on central bank cryptocurrencies. No one really knows how these will work and what they will mean for the broader economy, but one thing is for sure – when governments talk favorably about cryptocurrency, it is good for the entire market. It helps to allay fears about volatility and brings legitimacy to something that is not well understood by most people.
What is social trading and what does it have to do with cryptocurrencies?
With social trading, you basically bring together two groups of people on a platform: experience traders and those that want to become better traders. You get these people to join by offering incentives. Pro traders can earn by sharing their advice and having people follow them for trading tips. Newcomers can hedge their risk by learning from experienced traders and improving their skills by copying their trades and seeing for themselves how they play out.
Social trading became popular soon after the advent of social media. Many traders saw the opportunity to find a lot of people who wanted their expertise and were willing to pay for it. Since the cryptocurrency movement got underway, we’ve seen social trading take a new meaning. We have new tools, like blockchain ledgers and data analytics systems that help us become even better at seeing (and maybe even predicting) market trends.
Are there distinct advantages and disadvantages to social trading?
For advantages, you have traders that want to earn from their expertise now having an open, global market. And for the regular Joe who’s interested in learning about trading and wealth management, you now have a way for him to participate in the markets without taking a bath (hopefully!).
Both groups also have exposure to a social aspect for activities that could very well be isolated, since everything can be done from your device. Many social trading groups are active on platforms like Twitter and Discord and it also helps to have a crowd to keep everybody honest.
There are definitely some disadvantages. Probably the most glaring is that anybody can claim they are an expert and start charging people for their knowledge. Though there isn’t much recourse if you follow such a person believing they know what they are doing. If you copy their trade and it goes bad, you’ve lost in two ways – paying for bad information and losing out on a bad trade.
What is HedgeTrade and how does it solve some of the problems with social trading?
HedgeTrade is a social trading platform where experienced traders can post their trading predictions into smart contract powered “Blueprints”. The less knowledgeable traders can browse the Blueprint Marketplace, seeing the success scores, earnings, etc. of the person posting the prediction. Then, can decide to purchase a prediction Blueprint to unlock all the details of the trade.
Those that create the Blueprints can earn from the sales. But they also must put a stake up to back up their forecast. If their prediction is wrong, they lose their stake, while those that bought the Blueprint get their money back, the first seven buyers even get a portion of the lost stake. All of this activity is fueled by blockchain technology and smart contracts and users can either use HEDG tokens or Bitcoin to stake or buy Blueprints.
So the first problem we address is a better incentivization to be correct, which allows only the traders with good success scores, earning potential and time on the platform to make it to the top of the Leaderboard. Then they have even more exposure on the platform when others are looking to copy them.
The other problem we’re trying to solve is that many people who have never even traded stock are joining social trading platforms. They are at a higher risk, obviously. We try to bridge the gap by providing multiple media resources, including an informative blog with over 400 articles on everything from what is blockchain to how to stay safe in cryptocurrency trading markets. Our video channel is now being built up as well as a go-to source for newcomers to cryptocurrencies and trading.
What does HedgeTrade offer over its competition?
We are definitely the only platform that gives users their money back if a prediction they paid for is wrong. If they made that trade using the information, they may lose on that, but they now have a way to hedge their risk by not being forced to pay for bad information. This is all accomplished using smart contracts on the platform, so it’s not only automatic, but all that data is transparent and unchangeable.
Another thing that sets us apart is our team, which is made up of traders who want to build the ultimate predictions marketplace. Everyone on the team is involved in the app and is excited about using it, which I think is evident to the wider audience. The user experience and interface are really top-notch. With HedgeTrade, a new trader can get started immediately while seasoned Wall Street traders also have a cutting edge tool for social trading.
Disclaimer: Trading and investing in stocks, cryptocurrencies (also called digital or virtual currencies, crypto assets, altcoins and so on), mutual funds and so on, involves substantial risk of loss and is not suitable for every investor. All trading strategies are used at your own risk.