Individual investors have played a key role in the rise of cryptocurrencies. Despite numerous disruptions and risks, retailers continue to hold onto cryptocurrencies. But sometimes it comes with high costs and losses.
“Retail Investor” means a retail investor who buys or sells cryptocurrencies for an investment portfolio. In traditional finance (TradFi), retail investors are referred to as “main street”. Relatively, professionals and institutional investors are known as “Wall Street”.
In cryptocurrencies, retail investors are committed to driving demand and are often lured by the lure of “moonshot” returns from crypto’s decentralized freedom, accessible to anyone with an internet connection.
This has led to increased adoption and acceptance, helping to establish crypto as a viable asset class to replace traditional currencies. In December 2022, the retail supply of Bitcoin surged 17% to about 3.57 million. Last year, the market saw multiple collapses, such as he FTX. Nonetheless, retailers didn’t budge. This is according to on-chain research firm Glassnode, shared by analysts.
At the same time, the proportion of female crypto investors increased from 24% in Q1 2022 to 34% in Q4 2022. These examples demonstrate retailers’ confidence in the cryptocurrency sector.
Additionally, private investors have played a key role in the development of the crypto ecosystem. Many private investors are also developers, entrepreneurs, and enthusiasts, actively working to build new blockchain-based applications and services. Their contributions have helped expand cryptocurrency use cases and created new opportunities for investment and innovation.
Retailers have suffered for years
However, it’s important to note that the involvement of private investors has also brought condemnation. Volatility and risk in the cryptocurrency market have increased significantly. As more people become involved in trading cryptocurrencies, they become more volatile and more vulnerable to fraud.
The aforementioned cohort has faced challenges and losses in the past due to various financial institution and market collapses. One notable example was the global financial crisis of 2008, when several large financial institutions went bankrupt, resulting in huge losses for many retail investors. Many investors lost their lifetime savings and retirement savings as the stock market crashed and the value of many securities and financial instruments plummeted.
Enron’s bankruptcy in 2001 and Lehman Brothers’ bankruptcy in 2008 are other examples of economic collapses that have affected retail investors. These events have demonstrated the risks and potential pitfalls of investing in financial markets. Most notable are those who need a deeper understanding of the complex financial instruments and strategies involved. Despite the challenges, retail investors continue to play an important role in the evolution of cryptocurrencies and the broader blockchain he ecosystem.
Gracie Cheng, Managing Director of Bitget, spoke exclusively with BeInCrypto at the Dubai Blockchain Life 2023 event. Here she highlighted the involvement of retail investors in cryptocurrencies and shared some stories for protecting cohorts.
Current Trends of Individual Traders
Chen argued that retail investment trends have been moving forward for the past eight years. “Product-level updates are essential to shaping retail investor trends today. First, the emergence of stablecoins has added an anchor to fiat currencies, which are also the basis for various derivative products. The advent of perpetual contracts has further increased the stability and liquidity of crypto prices,” she said.
“For traders, a perpetual contract is an easy way to take a leveraged position in a particular market with no expiry date. In addition, investors can take advantage of the perpetual funding rate to minimize the risk of the underlying asset. Lower investment thresholds and product simplification have allowed more investors to participate in cryptocurrency trading, compared to where the market was eight years ago. It’s something we couldn’t provide.”
In addition, cryptocurrency exchanges also play a role in protecting and educating retailers. Bitget is no exception. Platforms like Bitget Academy offer education on blockchain, cryptocurrencies, and trading through in-depth guides, practical tips, and market updates. Similarly, BeInCrypto also offers educational resources.
Protecting customer funds and crypto
Spaces and owners are relatively mature, but hacks and collapses can lead to millions of dollars in losses. Therefore, cryptocurrency exchanges need a system that protects user funds. This can occur on various initiatives. Bitget, for example, launched his $5 million builder fund to help affected partners, increased the Bitget Protection Fund to his $300 million with transparent wallet addresses, and imposed a three-year withdrawal ban. Guaranteed.
“The next thing we did was Proof of Reserve. In addition to viewing the company-wide provisioning status, users can also view the provisioning evidence for their own accounts in the tool. Prove that the exchange reserve to the user’s assets is in a ratio of at least 1:1. ”
On the more general side, Crypto exchanges should take several security measures to protect user funds and cryptocurrencies.
Standard security measures
- Two-factor authentication (2FA): Two-factor authentication adds an extra layer of security to user accounts. Users must enter a second factor, such as a unique code sent to their phone or generated by a dedicated app. Login credentials.
- SSL Encryption: SSL (Secure Sockets Layer) is a protocol for encrypting communications between your device and the exchange’s servers. This prevents unauthorized access to your information and reduces the risk of data breaches.
- Cold Storage: Most cryptocurrency exchanges store the majority of user funds in offline wallets that are not connected to the internet. This makes it difficult for hackers to remotely access user funds.
- Multisig wallets: Multisig wallets require multiple signatures from different individuals to initiate a transaction. This provides additional security and makes it more difficult for hackers to access user funds.
- Regular audits and penetration tests: Crypto exchanges typically hire third-party security firms to conduct regular audits and penetration tests of their systems. This helps identify vulnerabilities and ensure that the exchange’s security measures are effective.
- Insurance: Some exchanges may offer users insurance to protect against loss due to theft or hacking.
- Regulatory Compliance: Many cryptocurrency exchanges are subject to regulatory oversight that requires them to implement specific security measures to protect their users’ funds and data.
What does the future look like?
Retailers have an important role to play in the crypto domain. It is imperative that individual investors carefully consider the risks and potential rewards of any investment opportunity and, if necessary, seek professional advice. Diversification and long-term investment strategies also help reduce the risks associated with investing in financial markets.
Global cryptocurrency holders make up about 4.20% of the population, with a total of over 400 million cryptocurrency users. The overall market size is still relatively small. On the contrary, the cryptocurrency market infrastructure is continuously improving, with a growing number of centralized and decentralized platforms offering users a wide range of investment, trading, and cryptocurrency usage options. His use of Dapps (Decentralized Apps) such as DeFi, NFTs, Gaming and Social is becoming more and more diverse with more industries getting involved in web3.
The basic performance of existing chains is also improving, and more and more individual investors are tending to join the cryptocurrency market. We expect it to grow functionally,” concludes Chen.
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