Is crypto trading ready for masses?

Today I read an article from the Dutch Authority of Financial Markets (AFM), sharing concerns about risks of crypto trading. Hanzo van Beusekom made the following statement in this article (translated to English)

" It is very important that (potential) crypto investors realize that, even with AFM supervision, trading in cryptos remains very risky. It remains important that consumers delve into the characteristics of a product such as the costs and risks. And always only trade with money that they can afford to lose "

The last statement struck me and hence I thought I need to share my opinion on this topic.

I have always been fascinated with new technologies and blockchain based tech was something which caught my attention during 2021-22. In my free time, I started exploring NFTs, Blockchains (Ethereum, BTC etc.) as well as followed several tech projects which were trying to combine different aspects of blockchain and digital ownership. During this journey, I also came across the trading aspect of crypto.

Talking about trading, just to keep things simple and relatable, let me share something with an example : In traditional market, you can trade in blue chip companies like Apple, Microsoft, Tesla, Shell etc. There will be price movements based on market conditions, but you can be fairly certain that you are not going to lose "all" your money. Mostly because these companies are well established, highly regulated and transparent in their books etc. On the other hand, there are also penny stocks (which are banned in most places now). They are high risk but could be high gain too. The high risk means you can potentially lose all your money! The same logic goes in the crypto space too. There are major tokens like Ethereum (ETH ), Bitcoin (BTC), Solana(SOL) etc. which can be considered as blue chip in the crypto space. Just check the MarketCap (MC) of these. BTC has a MC of over €2Trillion whereas ETH €384Billion. The movements in these can be drastic, but at the same time, similar to classic blue-chip companies, you probably won't lose "all" your money when you invest.

Some so called blue chip crypto tokens and their MarketCap (MC)

Then the question arises, why crypto is considered so risky and we keep coming across warnings such as "only trade with money you can afford to lose"? This is where the Memetokens come into place. In my experience, trading in these "Memetokens" is pure gambling. Moreover, there are people who "pump-dump" on these tokens by doing heavy manipulation. Take for example the recent Meme token $TRUMP and check out it's chart. The person (and their close group) who bought at a low MC where the only ones who made profit. However, by the time the hype reached it's peak (which was only in a few hours), whoever bought at that moment is now down over 50%! This is RISKY!

A reality check - mostly retail / masses become the exit liquidity at the top :(

What I have seen is that Memetokens are driven by emotions. People jump from one meme token to another, in hope of that "huge" profit. As these Meme tokens are on Decentralized exchanges (not the Centralized exchanges like OKX , Binance , Bybit etc.), the risk of exposure for retail masses is much higher.

This is where I want to point the regulatory bodies as well as people who are supervising (such as Autoriteit Financiële Markten to take a note. My request is as follows :

• High risk Memetokens are mostly traded on Decentralized Exchanges (DEX) where people lose their money. Unfortunately not much can be done by Centralized Exchanges (CEXs) to prevent this. Try to understand this core problem and take a lead in educating the masses about the risks of trading on DEX;

• Do not paint the entire crypto space as risky. This dilutes the purpose of bringing awareness. Focus on areas which can be controlled by CEXs (e.g. strict criteria on listing of Memetokens, following regulatory guidance for the same).

• Classify which tokens/coins are considered risky (e.g. Memetokens) and which ones are not (e.g. BTC, ETH etc.) in your awareness advertisements;

• Bring simplicity to understand what trading means in the crypto space. Try educating the masses to not get into FOMO (Fear Of Missing Out). This is one of the major reasons which causes losses;

• No amount of due-diligence of Memetokens will help. It's pure gamble and should be highlighted as such. Make everyone aware of this "gambling" aspect.

I can go on and on, but wanted to highlight some key pointers which should help the decision makers/regulatory authorities to start thinking in a way which will really help the masses. We cannot expect the Centralized Exchanges to take a lead in this, because they play a very tiny part in the chain. The heavy losses occur in the decentralized world, where no one controls anything, except the participants themselves. Hence, effort to educate has to come from the regulatory authorities directly.

I hope this short piece helps in opening up the dialogue on this risky topic.

Please note, my opinions in this piece are NOT A FINANCIAL ADVICE :D !