Trading as a Cryptocurrency Killer App

Oleg Giberstein @ Coinrule
Published in
8 min readAug 7, 2018

Trading and investing in cryptocurrency for purely speculative purposes has been increasingly under attack from some of the old guard of the Blockchain space. In the words of Ethereum co-founder Vitalik Buterin, “Sometimes a conflict is created between people that want to change the world and people that see this technology as an investment instrument”. For some in the Blockchain world, trading seems to have turned into a dirty word.

While we don’t completely disagree with this thinking here at given some of the truly crazy stuff we have all been witnessing over the past year: the frenzy, people throwing their entire savings into pump and dump schemes, the ICO gold-rush and all the rest of it. But despite his brilliance, Vitalik and many others are still missing the point when it comes to trading.

While it’s perfectly justified to criticize some of the hype, greed and get-rich-quick schemes of the space, trading is not just an undesirable side-effect of the Blockchain revolution: on the opposite, trading is indeed one of the killer apps of Blockchain that everyone has been waiting for. This article will take a look into why that is the case.

Why the “When Moon” Mentality is not a total Disaster…

At its core, trading is nothing other than the process of price discovery. In any market, the true price of an asset can only be known once a sufficient number of transactions have taken place which indicate to the market the value that buyers and sellers put on an asset. While traders are far from immune when it comes to irrational exuberance and crypto markets can at times resemble a rollercoaster, the underlying problem ironically is not too much trading but too little: the market swings are only possible because a comparatively small amount of liquidity drives most coin movements, meaning that insignificant swings can start a large price shift.

The only way to change it? More liquidity, more investors and more trading, which will reduce the swings and make the market less volatile. In practice, the speculative drives are only bad in so far as they attract the wrong type of public attention — but in a market that is in the middle of a price discovery process, they are to be expected. As these markets mature over time, a lot of the madness will disappear by itself.

But this is just the beginning…

Came for the get-rich-quick, stayed for the Revolution

As genius-investor and Silicon Valley Philosopher King Naval Ravikant so rightly pointed out, “Bitcoin is a tool for freeing humanity from oligarchs and tyrants, dressed up as a get-rich-quick scheme.” Most of us in the space think that the Blockchain revolution will come from decentralization of power, increased privacy, open-source systems with in-built incentives versus the old centralized ‘middle-men’ companies like Google or Amazon and decentralized governance systems. But it is worth keeping in mind that Cryptocurrency started off as exactly what is in the name: currency, i.e. private currency outside of government control.

This matters in more ways than this article can address but one aspect is of particular relevance: the much discussed, often-misunderstood widening income gap between the so-called top 1% and the rest of the population. It is no coincidence that income inequality truly started to take off from the late 70 and early 80s as modern finance was emerging (we could also talk about debt bubbles, the 1971 end of Bretton Woods, inflation and Eurodollars in this context but will leave this for another day…). As capital income gains have outstripped salary growth over the past 40 years, partially driven by the phenomenon of Hyperfinancialization (another story for another day…), those who have access to the best investment opportunities have a significantly better shot at growing their wealth over time than anyone else.

What this means in practice is simple: a small group of privileged, early Facebook investors can gain returns of about 600,000% on their money before the public has the opportunity to invest into Facebook stock. On the other hand, Facebook shares buyers have ‘only’ seen 300% returns since the IPO. Not a bad return but far from life-changing for most, particularly given that Facebook was among the public investment highlights of the past decade. The investment opportunities with life-changing potential are mostly closed to the general public in the current financial system.

If you have been in crypto long enough, you probably have seen the various ICOs that are only open to ‘accredited investors’, who are supposedly more sophisticated investors simply by the amount of capital available on their bank account at present. These are attempts by governments to apply the bad old system onto the new world of cryptocurrency. These attempts are bound to fail due to the decentralized nature of these new financial systems. The critical aspect here however is that Cryptocurrency ‘speculation’ is already opening the door for an entire generation of new investors who will have a shot at the same very high returns that are currently only available to a small group of privileged investors.

Millennials as the ‘Unbanked’ of the Developed World

The Crypto old guard likes to talk about ‘Banking the Unbanked’ as a major potential game-changer coming from Blockchain technology. But as hugely important as this use-case is, financial exclusion has many elements to it and does not only impact citizens of developing countries. Remember that capital gains have been and continue to be disproportionately larger than any type of salary income? Today, 3 out of 5 Millennials don’t invest in stocks and the holdings of the other 2 are lower relative to the previous generation. For many Coinrule users, myself included, Cryptocurrency has been the first asset class we have ever traded.

The numbers show one thing: this is a structural issue. Equities markets are part of an ‘old’ financial world happening both at a slower pace and in systems and tools still designed for a time before the internet. If you are between 20–35, chances are you are significantly more likely to trade crypto in a 24/7 market that feels at times like a Computer Game than stocks of boring old companies on outdated platforms. Millennials, already financially struggling with student debt, housing prices and job markets, see crypto trading not as a risk but as an opportunity to join the ‘financial party’ to which they had previously not been invited. Trading cryptocurrency is truly a killer app that helps to open new financial opportunities for previously ‘excluded’ parts of society, finally allowing Millennials to participate in the financial system not just as debtors but also as investors. This is not a small, undesirable side-aspect of a bigger list of Blockchain innovation, but literally a game-changer for millions of people.

Trading can change your Life

Quietly yet in plain sight, cryptocurrency trading has become the killer app of Blockchain we have been waiting for. Scaling of technology and wider adoption are unstoppable developments and only a question of time at this point, but the ability to add liquidity to previously completely illiquid asset classes such as startup investments, real estate, organizational governance and to so much else and make these ‘assets’ tradable is already here today. Cryptocurrency trading allows anyone from a family in India to an Investment Banker in New York City to play in the same markets with significantly lower barriers to entry for anyone involved. It is no doubt extremely risky, highly speculative and dangerous, especially for those who fail to do their research. But much of these issues are growth pains. As new liquidity will gradually enter the markets, volatility will drop. Opportunities like Masternodes or dividend tokens are adding additional avenues for investors to earn safer returns. Everyone, not just the usual privileged suspects, wins on an unprecedented scale.

Of course investors will get burned in the process. But while some regulators prefer to avoid investor loss at the trade-off of killing entire markets, the reality is that investors and traders mature and learn from their mistakes. Trading is a repeat game, you live and you learn, just don’t stake your house on it. What about the scams and hysteria? They are unlikely to go away but entrepreneurs will inevitably create new ways to teach people about trading and improve the flow of information. Open-source inspired projects such as ConcourseQ, where I am a QFellow, or Messari, will grow into the Moody’s and S&P like credit rating agencies of the space. Projects like Preethi Kasireddy’s TruStory will help to uncover the scams. Ultimately, this will become a market that is likely to be significantly more accessible, transparent and democratic in terms of participation than anything that Wall Street or the ‘old’ financial system have ever produced. Retail investors will gain access to returns and opportunities that have never before been available to them. Today, thanks to cryptocurrency trading, literally anyone could be the investor into the next Facebook or Google.

Parting Thoughts

If regular people could invest into technological innovation, maybe even in areas like medical research and many others (funding innovative healthcare research via ICO — why not?), all supported by a vast and extensive information and education industry that prepares them for it, the playing field between the rich and the rest would begin to level. In a time of growing opportunities but also growing risks for some, say through automation-related job-loss, the number of individuals choosing to trade any type of asset for a living will only increase. With greater flexibility, location independence and, thanks to tokenization of everything, an ever wider range of tradable assets, this does not have to be the nightmare scenario which some seem to envision in a world where ‘speculator’ is often still a ‘bad’ word.

With trading systems like allowing more and more traders to compete with professionals and trading bots on a level playing field, the future really does seem bright for traders and the Blockchain space as a whole. Maybe even Vitalik will have to agree with us in the end.

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With Coinrule you can easily develop your own trading rules and strategies and set them up to run automatically. It is the “if-this-then-that” for cryptocurrency trading that allows you to plan your crypto trading rather than having to sit for hours in front of charts. Best of all? No coding skills are required, meaning anyone can use Coinrule.

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Oleg Giberstein @ Coinrule

Co-Founder of @CoinruleHQ ( Love to connect with people, love to connect people with each other