As Bitcoin jumps to an all-time high of $64,000, novice investors are more eager than ever to participate in the cryptocurrency craze, aiming to book easy profits.
Interestingly, any investment in Bitcoin would have generated an 834% return over the last 12 months, while other currencies such as Cardano yielded over 3500% while Ethereum offered a 464.1% return.
Crypto trading has also spawned a social layer, with millions of users gathering on Reddit and Discord forums to discuss the potential market with experienced traders, hoping for some advise and investment tips in the process. Capitalising on this trend, companies are now developing copy trading platforms, aimed to target novice investors who are seeking to earn profits.
What is copy trading?
Copy-trading platforms let users to mimic the trades of more experienced traders. This allows novices to shorten the steep learning curve, while still maintaining full control of their accounts.
For instance, if an expert trader buys 100 shares of say Tesla stock, you will do the same. If they sell coins when the price is high, you imitate them and do the same. If they buy a cryptocurrency when the price falls, you will do the same, trusting that the trader expects the price to go up in the future.
Hayden Hughes, CEO of Alpha Impact, a crypto copy trading platform said, “There is too much noise and too much volatility from unqualified people hyping or hating coins. We want to remove that noise and educate people about crypto trading and value investing by building a hub for investment insights where users can identify a top trader based on the trader’s actual trading history, and copy that expert’s trades through our platform.”
Crypto copy trading platforms are designed so that newbie investors don’t have to go through years of trial and error to learn how profits are booked. You don’t have to take courses that explain how the crypto market works. In short, you don’t need to lose money while learning how the crypto market works.
But is it worth it?
This is completely dependent on who you copy and how much money you put in. Now, if the expert trader you are mimicking has a low-risk profile, you can safely put in more money without worrying much about losing your investment. On the other hand, if the trader you are copying makes high-profit margins but also has a high-risk profile, you might want to consider investing less money. To put into perspective, copy trading is worth it only if you choose the right trader.
However, it is often beginners who benefit the most from copy trading, as they are the ones who are most likely to lose money if they were to trade themselves.
It is worth noting that a major risk of using copy trading platform is that it has high transaction fees. These fees can eat into your profit. You should always be on the lookout for hidden fees when copy trading.
How does a copy trading platform work?
Apart from copying the trades of seasoned traders, community members, especially beginners, can also access the latest news from crypto experts, and learn the art of crypto investing through masterclasses and guides. In turn, traders on the platform benefit from growing a follower base as a trusted opinion leader, which allows them to earn passive income from subscriptions and via a revenue share model that lets them earn a commission for each trade.
Hughes asserted that the goal is to allow people to invest smarter in cryptocurrencies “by connecting with the industry’s best traders with performance history and proven statistics; and the best part is, people do not need to put money on our platform to copy traders–– they can copy traders from their existing Binance or investment account.”
“We encourage traders to become key influencers and bridge communication between followers and traders, aiming to not only simplify copy trading but empower people to profit from cryptocurrencies by providing an educational platform where traders can explain their rationale behind trades and discuss strategies and industry news,” he added.