Retail Investors Must Be Prioritized to Truly Democratize Crypto

Blockchain, News, Opinion | June 27, 2022 By:

With inflation at a 40 year high, savings are becoming less and less valuable. Instead of leaving funds to sit and lose value, many are changing tack and diving into the world of investing. As part of this process, they are also realizing that the only way to truly achieve meaningful returns today is by diversifying portfolios and taking on more risk. This approach has led to cryptocurrencies being recognized as 5% of a higher risk, higher reward portfolio

While riskier than holding savings, crypto investing has opened up the door to new opportunities and  given investors a new revenue stream that they otherwise would have had to survive the current economic climate without. 

Is crypto really democratizing access to investing? 

With the global cryptocurrency market growing by an incredible 900% since March of 2020, crypto has proven itself as an effective investment opportunity. So much so that 97% of people are confident in crypto and 55% of people consider it to be a long-term wealth building strategy

Inevitably, the popularity of crypto and the opportunity available was going to attract the attention of traditional investment stakeholders and a study has shown that 82% of those traditional stakeholders plan to increase their exposure to digital assets by 2023. 

This has caused concern among the retail investor community. Investing in crypto has no barriers to  entry and was specifically designed to challenge the current financial structure that does. With crypto attracting the attention of traditional financial stakeholders, retail investors fear that exclusionary practices will start to creep in, and these fears are valid to an extent. Look at launchpads. These allow investors access to a project in the very early stages of investment. On the surface this sounds like a great opportunity for retail investors but often investors are required to have large sums of money to participate. 

Equal access to opportunities is important within crypto to ensure that it doesn’t repeat the same mistakes of the current financial system. 

Institutional investors will improve crypto, not harm it

While people should be skeptical of institutional investors, they shouldn’t be completely demonized. 

Many speculated that institutional investors would cause liquidity issues with Bitcoin, but that is not something that has actually happened. Converse to this, institutional investors would actually be able to improve the Bitcoin market. They cannot manipulate the market on a sizable scale and would, therefore, balance out whales – leading to increased stability. 

Further to this, many institutional investors also work with regulatory bodies to develop clear policies and guidelines. This will be a huge benefit to retail investors, as it will reduce some of the 8000 crypto scams in the US and countless others worldwide. Regulations are desperately needed within the crypto space and with institutional investors working with regulatory bodies, retail investors are less likely to be left behind.

Governments are fixing the issues harming retail investors 

Matching the positive work being done by institutional investors, governments around the world are starting to develop regulations to clamp down on illicit activity within the space – further protecting the interest of retail investors.

The Central Bank of Singapore has issued guidelines that aim to restrict manipulative trade practices by crypto trading service providers, which will protect traders who are not fully aware of the risks involved in crypto trading. 

Furthermore, in the wake of the TerraLUNA stablecoin crash, the US government has released a new bill that aims to tackle the issues present within the cryptocurrency space, and prevent more devastating crashes from taking place.  

Crypto was designed to change the current structure of society – increasing privacy, democratizing access to finance and balancing power. With this in mind, it’s understandable why many crypto participants wouldn’t trust governments to fairly and effectively regulate the crypto market. Despite this, many participants actually believe the opposite, with a recent study showing that nearly 30% of investors believe that regulation will improve crypto. Improving the crypto landscape is key for mass adoption and it’s clear that regulations will be an integral part of the puzzle on this journey.

Educating new retail investors is a necessity

Alongside regulations, we also need to see more education around the risks and rewards of investing. 

Exchange platforms can help a lot with this. The current crypto user-base is dominated by tech-savvy millennials. To appeal to older audiences, we need exchanges built for newbie investors, kitted out with helpful guides, easy to use interfaces and high levels of security. 

The volatile nature of the crypto market is here to stay but that  isn’t stopping  retail investors experiencing it. Crypto investing is creating new ways to generate income as inflation rises and hoarding money in a bank account becomes redundant. But the current economic climate is not  enough of an incentive alone – retail investors need security and education before taking that leap, and that is something that regulation, alongside institutional investors and crypto exchanges can help with.