It so happened that the very concept of the stock market, even for those who do not participate in the financial industry, is associated with rigor, and large transactions. We can say "thank you" to the long history of a conservative trading system, as well as to the cinema, which created this image in the mass consciousness. But recently, major changes have taken place in the economic world, a new type of trading has appeared. It's called crypto trading.

Highlights of social crypto trading

Social trading (or copy trading) is a process of copying moves of more experienced players. By subscribing to wise mentors and copying the signals offered by them, less-experienced crypto investors and traders can quickly improve their skills along with getting some income. 

However, social crypto trading, unlike traditional one, has more risks. We can highlight a few main factors that traders should constantly pay attention to.

They include:

1. The immaturity of the crypto market

The regulation of classical stock exchanges by government organizations and their requirement for constant access to up-to-date financial statements of companies created an environment for investors with minimal risks. Digital currency trading cannot boast of such an approach, but, nevertheless, crypto trading provides its clients with more freedom - it has a fairly low entry threshold (for example, the Venmo platform allowed its users to conduct crypto trading by investing only 1 dollar), a higher percentage loyalty and, often, a higher percentage of profit, in comparison with classical exchange trading.

2. High volatility

Price spikes are the usual thing in the cryptocurrency world. The mood of the crypto can change with no reason. Therefore, sometimes large transactions are interspersed with equally large losses. Traditional crypto trading is more stable in this regard.

3. Safety

The crypto industry positions itself as a new, transparent, free and secure economic model. But since there is no centralized system of legal regulation in this sector (the main idea is to have the opportunity to exchange without intermediaries), there are risks associated with the restoration of users' assets in case their accounts were hacked, and getting legal compensation for the damage caused. As part of the new crypto-economic policy, the responsibility to monitor security falls on the shoulders of the exchanges themselves. To protect their customers, they most often use:

• two-factor authentication technology;
• digital multi-signatures;
• Hardware Security Module (HSM);
• Secure Multi-Party Computation (MPC);
• Know-Your-Customer (KYC) policy;
• Anti Money Laundering policy (AML) ;
• liquidation and insurance funds, which are formed by crypto-exchanges as a safety cushion for traders in case of a prolonged period of high volatility.

4.Hard choice

Choosing the right expert for social crypto trading is not an easy task. Ordinary social networks democratize the process and facilitate access to the cherished signals, but do not help traders to adequately compare different offers and check the reputation of one or another “expert”.

Specialized services for copy trading help to reduce these risks. It takes a small amount of time to create an exchange account, and in return users receive a convenient interface, specially tailored for maximum automation of copying transactions, technical support and documentation.

Pioneer among copy trading services

In this article we’ll take a look at one service for social trading – eToro. Why did we choose this platform? Just because it has basically created copy trading. Founded in 2007, eToro invented the concept of social trading (and the term CopyTrading itself) even before Bitcoin was born! The feature of copying top users’ trades was available in Open Book, the first social platform for investors.

eToro offered support for cryptocurrencies in 2014, soon releasing its own crypto wallet for iOS and Android. Today, this company has evolved into a multifunctional service offering a whole range of tools - from its own eToroX exchange to a trading academy. 

For regular customers, the existence of such a evolved ecosystem is rather a plus, but for some users it creates limitations. For example, you can only withdraw coins from the eToro platform through the eToro Wallet. Commissions vary by coin and may fluctuate with the market. You can learn more about eToro copy trading services on the official website. 

There are many other platforms for copy trading out there, such as:

• Phemex. On this platform you can follow successful traders and track their deals.
• Gate.io. This crypto exchange has a Smart Quant section that provides copy trading functionality. The system uses an artificial intelligence network that automatically tracks data for the last 7 days and generates a trading strategy.
• ByBit. This platform was launched in July 2022. To start using it, you need to transfer funds from a spot account to a copy trading account.

Governments opinions on social crypto trading and the new crypto economy

Trading with such an unstable and not yet fully formed instrument as a cryptocurrency forces governments to constantly monitor this process. To make their life easier, some countries have already recognized crypto as a licensed means of payment and have made adjustments to economic policies that have given citizens additional freedom.

The authorities of El Salvador turned out to be the most enthusiastic about crypto – on June 9, 2021, the president of the country recognized Bitcoin as an official means of payment. After that acceptance of Bitcoin for payments in this country has become mandatory.

Australia, Canada and Finland are considering Bitcoin and altcoins as a legal currency and plan to soon apply a tax system to them. Germany has allowed some of its funds to hold 20% of assets in cryptocurrency. The US defines cryptocurrency more as a financial service than legal tender, although companies like Microsoft, Subway and Dish Network already accept payments in Bitcoin.

The UK is not yet ready to officially recognize Bitcoin as a means of payment, but, according to experts, it is friendly towards the new currency. At the moment, the country is trying to create the needed economic conditions for the introduction of crypto in the economy.

The European Union approves the combination of centralized and decentralized economic systems, but it is bound by the opinions of individual countries. So far, not all members of the Union have approved the idea of ​​a new economy.

To stay tuned, read more articles on cryptocurrency regulation in different countries. Explore Germany, South Korea, Brazil, Australia, Nigeria, Mexico, India, Russia, Vietnam, USA, Switzerland and Portugal with SimpleSwap Blog!

Final thoughts

According to experts, the world is not yet ready to abandon traditional trading and completely switch to cryptocurrency. Traditional stock exchanges will continue to operate indefinitely, but a hybrid economy is possible: the coexistence of a centralized and decentralized system. 

Summing up the analysis of social crypto trading, it’s important to highlight that it has it’s risks. Before entering into a crypto deal, traders need to calculate in advance how much they are ready to lose if it all collapses, since the level of volatility is very high.

In addition, it is important to have a competent trading strategy, as well as experience in playing on the stock exchanges even for a copy trading. This knowledge will help you to find a good trader to copy. 

Don’t forget, the easiest way to buy or exchange coins is to use SimpleSwap services.

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.