In January of this year, the world became aware of the ongoing revolution in finance. By coordinating on Reddit and using Robinhood (one of the most popular online trading platforms), a fierce and vast group of small investors has increased the value of Gamestop’s shares by 2000% (from 17 to 340 dollars), putting even in serious difficulty. the big Wall Street funds which, on the contrary, were betting on the continuous decline of shares linked to a chain of physical video game stores.
On the one hand, there was talk of the revenge of ordinary people against 1% of high finance. On the other hand, the enormous risks associated with unscrupulous market manipulation conducted via social media. The most used word, however, was another: democratization. Through the new trading apps, which give the possibility to invest in shares via smartphone with the simplicity with which you make purchases on Amazon, the main barrier that prevented anyone from improvising a little Gordon Gekko has disappeared. That’s it?
“Democratization of finance is an excellent definition which, however, is abused a little too much”, Eric Demuth, CEO of BitPanda, a trading platform born in Vienna in 2014, explained in his speech at the Fintech Summit in Milan. an application with which a click is enough to trade is not democratizing: it is also necessary to educate, to make everything understandable, to create contents that explain the mechanisms and the context “.
The fear is that the spread of these platforms creates the conditions for the birth of continuous small bubbles like that of Gamestop, multiplying the dangers for careless investors, who by aiming for easy gains risk remaining with the match in hand. “There can always be unique circumstances that create excessive expectations, but when you want to get high returns you need to know that you are also taking great risks: the two are interrelated”, explained Yoni Assia, founder and CEO, during the Fintech Summit. by eToro, an Israeli trading platform with over 20 million users and 600 million in turnover.
Nine years of startup in Italy, photography
The fundamental principle is always the same: never invest more than you can afford to lose. Applications such as eToro, which have a strong social soul, also allow you to observe how the most experienced investors move in this very complicated sector and also, if desired, to automatically copy their every move, deciding how much to expose themselves economically. Other platforms, such as BitPanda itself (but also those specialized in cryptocurrencies, such as Coinbase or Binance), instead focus on “academies”: short courses to learn the basic mechanisms of finance and the various tools and assets available. “People cannot be given only the means to invest, they must also be concerned about their education, since – in my opinion – wrongly – finance is not taught in schools”, continues the CEO of BitPanda, a platform that has recently exceeded 4 billion. valuation dollars.
Education becomes even more important since these applications were among the first to focus on a volatile and risky market such as cryptocurrency, a sector in which BitPanda has always specialized (which only later diversified its offer ) and that eToro also introduced in 2013, first with Bitcoin and then with many other digital currencies. “Personally, I am very optimistic when it comes to cryptocurrencies,” explains Yoni Assia. “I think the stage where they could only be a passing fad is long gone and that bitcoin can truly be digital gold. As for blockchain technology or applications such as DeFi (decentralized finance), I believe they can be very interesting innovations, especially if we consider how worn out the traditional financial information system is now ”.
Bitpanda and Fabrick together
Is it therefore wrong to continue to consider cryptocurrencies as a far west of finance, deregulated and based solely on speculation? “Traditional stocks are also a speculative asset,” BitPanda’s Eric Demuth explained during his speech. “The risk lies in volatility and poor regulation, but over time both problems are resolving. The more the market grows, the more regulated and professional it becomes: we could say the more mature. However, the fact that it is still volatile today does not mean that it is a simple gamble: from my point of view it is an excellent long-term investment “.
All this, of course, should not be taken as financial advice, but only as the point of view of those who, however, earn thanks to the people who invest in cryptocurrencies and more. In this respect, however, it should be noted that the European regulation of trading platforms is more rigid than that of the United States and does not allow investors who are less experienced or less economically gifted to take certain risks. And it is also for this reason that Demuth rejects the European Robinhood label: “I would not compare myself with them, the US system is completely different: there you can do things that are prohibited by us because they are too dangerous. And personally I think that’s right “.
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