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Market Background
Investing in cryptocurrencies such as Bitcoin has become a trend for global investors. The current channels for everyday investors to purchase cryptocurrency are typically the services provided by dedicated exchanges or more traditionally Fiat-focused digital payment providers like Paypal and Cash App.
Currently, the investment channels offered by cryptocurrency exchanges tend to have the following issues:
Steep learning curve: purchasing or trading crypto is a complicated process that alienates newcomers;
Inconvenient trading: the fiat to Bitcoin trading mode is dominated by spot trading and has an average withdrawal time of about 10 minutes;
Security risks: Cryptocurrency losses. Hacks occur from time to time, and the security of user assets is difficult to guarantee;
Lack of investor knowledge: Newcomers do not understand the basics of investing in cryptocurrency and knowledge is not commonly shared;
Anti-money laundering: Due to the characteristics of cross-border transfers, cryptocurrency has provided an opportunity for money laundering, and has thus become a target for regulatory investigation.
The Bitcoin investment channels provided by traditionally fiat-focused digital platforms have the following problems:
Limited geographic coverage: Paypal and Cash App, for example, are currently offering Bitcoin purchase services only in the United States;
High fees: Users will be charged high fees for buying Bitcoin through these apps. Typically from 2% to 5%, which is much higher than exchange and OTC channels.
Both crypto exchanges and traditionally fiat-focused apps also share another problem: After attracting users, these products lack differentiation between each other, and there is a lack of choice and innovation for users.
Investment companies have proven it is more efficient to operate with a trading team than to have individuals manage trades alone. Retail investors have a considerable disadvantage in this regard. Traders at investment firms share knowledge, ideas, and successful methods to realise opportunities. Retail investors usually trade alone and do not communicate in real-time with other investors. They can only access their own knowledge, skills, and experience and as a result they miss a lot of opportunities.
The arrival of social investment communities has changed this dramatically. Earlier this year, the infamous Gamestop investment by members of Reddit’s Wall Street Bets forum highlighted the power that online communities can have in the field of trading and investment. Social investment networks connect investors from all around the world, allowing them to share information, strategies, and overall leverage their combined skills to make smarter and more effective decisions. Bit.Store builds upon this idea and empowers small-scale investors with the ability to discover investment opportunities by participating in a larger community.
There are already some companies that provide cryptocurrency trading with fiat payment at the core to small-scale users that also have associated social investment communities. These platforms have already become leaders in their operating regions.
Specific Case Studies:
Founded in 2007 and based in Israel, eToro is the world’s first and largest social investment platform. Starting as an online foreign exchange trading business, it soon developed into an online social investment network integrating various major financial assets like stocks, funds, foreign exchange, commodities, and cryptocurrencies in the following 14 years.
These platforms currently have more than 3 million user accounts from over 200 different countries, and thousands of new accounts are opened on a daily basis. Through social investment networks, the group’s pooled knowledge can be used to make sharper investment decisions. The commissions generated from crypto transactions increased nearly by 23 times to $264.2 million in the second quarter of 2021, compared with $11.2 million in the same period the previous year. eToro is in the final stage of its SEC review and has plans to become a publicly traded company via a merger with a Special Purpose Acquisition Company (SPAC).
Overall Scale:
The cryptocurrency investment market is growing rapidly and Bitcoin’s market value, in particular, is growing exponentially as adoption increases. It has reached a market cap of almost $1.3 trillion in this quarter, a large increase on the $500 billion at the end of 2020. Bitcoin’s trading volume is just over $4.3 billion daily and some analysts project that Bitcoin will surpass the U. S. stock market volume of $446 billion daily by 2025.
The newly emerging subset of non-fungible tokens (NFTs) also now show huge potential for a further expansion of the digital asset market.
Last modified 1yr ago