During the market’s peak in late 207, Bitcoin’s trading volume hit roughly 176 million BTC. We are nowhere near that figure these days, but the amount of Bitcoin trading has generally been increasing.
More institutions are coming into the picture. New investment vehicles are being set up. And the best of all, more countries are implementing regulation related to cryptocurrencies and Distributed Ledger Technologies (DLTs).
This is good news for the market and could attract new investors as we head into the 2020s. I think that there are some people across the world who have taken the hint, leveraging the strengths of decentralized systems and token economics to create platforms where everyone can trade and earn.
These ‘social trading’ platforms have come a long way, both in terms of features offered as well as a general phenomenon. Do you ever wonder how some traders manage to make some insanely profitable trades? That sort of knowledge is what these social trading platforms attempt to give its less seasoned investors.
The platform I’m talking about here is HedgeTrade, which is arguably the most well known of the social trading platforms that are around. It’s ranked 21 on CoinMarketCap with a market cap of just over $500 million. And it’s a fairly new token too.
First, I’ll explain what the HedgeTrade platform is, as well as the concept of social trading, before moving onto how it works and its potential as an investment.
What is HedgeTrade (HEDG)?
HedgeTrade was formed in 2017 by David Waslen and Peter Danihel, who currently serve as Chief Executive Officer (CEO) and Lead Developer respectively. The project conducted its ICO in 2017 raising around $2.1 million.
There are 2 major stakeholders in the HedgeTrade platform: the traders and the trading “experts.” The platform makes use of token economics to ensure that everyone is incentivized on the platform to behave honestly. The end result, just like all blockchain tech, if everyone behaves better, everyone stands to gain more.
The traders on the platform are the regular people, perhaps the newbie investor who needs help on trading. The expert is the veteran trader who knows all the tricks. The latter group is encouraged to publish their predictions and strategies, which the newbie traders can look at and learn from to make their predictions.
These predictions are packaged in a “Blueprint”, a smart contract that can be purchased by users. If the prediction is correct, the experts are paid. If not, the money is refunded to the user.
This process very accurately sums up how most social trading platforms. The name of this type of platform is a real giveaway: you’re relying on other people’s knowledge and skill to make some gains yourself.
HedgeTrade raised a relatively small amount of funds during the ICO, and now is now 21st on CoinMarketCap, having appeared out of nowhere. How did it get to this position?
The Social Trading Phenomenon
Social trading is actually quite an old concept, but it has really clicked with the cryptocurrency community. There are several social trading platforms for traditional asset as well, with Robinhood probably the biggest name in the space.
Cryptocurrencies by their very nature are social and democratic, and rely a lot on other incentivizing people to facilitate its purpose. That’s why it’s very important that the right incentives are in place to get people behaving in the most optimal manner.
Social trading platforms are on the rise and HedgeTrade definitely isn’t the only one out there. The biggest competitors to HedgeTrade is without a doubt eToro, which has influence in both the traditional and cryptocurrency markets.
It’s very clear as to why social trading is a popular thing. It’s an easier way to make money reliably and it has a particularly strong reason for existence in market that is extremely volatile and unfriendly towards newcomers.
Of course, this makes it a challenge for HedgeTrade, which has to compete with several other platforms for users and growth, but given that the platform has proven itself as a
Going with the tagline “Built for traders, by traders”, HedgeTrade exists exclusively to help inexperienced traders make somewhat same levels of profit as experienced traders - just like social trading platforms for traditional assets.
There are a few different fundamental design choices that the team hopes will make it a go-to trading platform. First, the user interface and experience is simplified and intuitive, something which is important when you consider that you are dealing with newbies. Real-time data and market insights are also key parts of the platform.
Other strategic choices include being available on all devices - and in the future, the greatest number of investors will probably be the average person who would like to use their smartphone to invest.
As mentioned, there are two major stakeholders. The trick in HedgeTrade’s platform is to keep expert traders behaving honestly with its BluePrint staking model. The latter executes “true or false results based on real market information. HedgeTrade rewards traders with HEDG tokens for successful predictions as paid for by the Blueprint purchasers.”
In others words, the user pays for a blueprint that a trader has formed and the smart contract decides the outcome based on real world information.
The blockchain also uses a unique consensus algorithm called the Proof-of-Rank algorithm, which is essentially a reputation/ranking algorithm for the traders. This algorithm takes into account criteria such as the age of the account, the number of successful blueprints, the amount of HEDG earned, unique contributors and the success streak.
HedgeTrade is currently in its beta phase, with version 1 of the platform soon to arrive. Future builds of the platform will include Proof-of-Rank integration, data from more financial markets, more assets integrated, the Decentralized Dispute Resolution process and an additional staking model.
The Decentralized Dispute Resolution process is self-explanatory, it’s a dispute mechanism that could be used to ensure impartial judgement in the case of a dispute.
The HedgeTrade (HEDG) whitepaper explains the whole setup in a little more detail.
Past Performance of HEDG
HedgeTrade’s HEDG token has done unusual in the short time its token has been up for trading. There have been a few notable spikes in token value and new support levels attained, most prominently in June 2019 and in early December 2019 (not too long ago!). The latter happening when the beta version of the platform went live.
It’s only been a short time, but there’s been a lot that makes the ROI on HEDG look like a good investment, although that will have a lot to do with how well the platform develops and grows.
The Future and Potential of HEDG
So does it have the potential to grow much more? There is certainly a possibility that these social trading platforms could become a much bigger trend. People are always looking for ways to make money and social trading has a proven track record of investors making profits simply by copying those with more knowledge.
The challenge for the HedgeTrade itself, regarding whether it will grow in price, will come down to how well the platform develops and the features that are tacked on. Of course, more users will also be a big part, but people need a reason to hold onto HEDG first.
You can imagine that many more social trading platforms will come up, or perhaps some big name exchange like Binance will introduce a similar feature on their platform. This could make life difficult for existing social trading platforms, having to compete with exchanges with much higher trade volumes and features at their disposal.
Given all of this information, how well could HedgeTrade do? It’s probably best to look at the work ethic and roadmap of the project and see how they plan to chart out the future.
They do have quite a few interesting milestones ahead of them, with the Proof-of-Rank research and development and additional staking mechanism particularly interesting features. People are always looking to make passive gains from staking, so that should be worth watching.
However, one thing that might really get them to become something truly big is the inclusion of other assets. eToro is really gaining popularity now, and it’s easy to imagine crypto users diversifying their portfolio a bit.
You can imagine traditional market investors and newbie investors alike welcoming the option to invest in more assets - it’s just more rational.
The team has done a lot to reach where it is as well. So if HedgeTrade can keep up this work and find itself adding new features and assets, then it’s more than possible that it will become a busy hub of traders who are looking to learn from others.
It will take its own time to reach the point where we can say anything conclusive about it, but it is worth keeping an eye on.
I don’t think we can question the fact that social trading platforms are a thing, a thing that people would want to actively engage in. It lowers the barrier of entry for investors who are worried that their lack of knowledge will burn them in the market. Being able to rely on others, who have lots of experience, makes the job a whole lot easier. And the experts get paid to contribute properly too. The system itself is ingeniously simple yet effective.
HedgeTrade has put itself in a decent position and the roadmap looks interesting. If they can keep things going and incentivize users with new features, options and discounts, then there’s no doubt that there’s some room for them to grow.