Prize-Linked Crypto Trumps Active Trading in Any Market Cycle

Quickly presenting the distinct advantages and long-term profitability Prize Linked Crypto accounts will have on newcomers in the market over active trading.

Fortune favours the bold…… but bad risk management leaves you out of pocket

The world of cryptocurrencies has revolutionized the concept of modern finance, and it empowers individuals to take control of their future wealth by holding a completely new asset class that has the ability to grow exponentially in a holder’s lifetime. Yet data tells us that digital assets are predominately used as active trading instruments over Buy & Hold strategies.

BTC Daily Trades

Our view on this

When we kicked off the development of Klink back in early 2022, my Co-Founder Philip and I weren’t busy predicting the market downturn. Instead, we observed that most digital assets held by retail were being managed through exchange platforms. These speculation-led platforms equip users with risky tools such as 10–100X leverage, pump & dump token launches, and high double-digit yields. This tooling poses a significant risk for newer users without proper disclosure and warnings to the many who have not had enough education or time in the market to utilize the risk on platform services to their advantage over time.

There is a burgeoning alternative method for people early in their investment journey that combines the daily thrill of earning rewards, and potential upside through holding crypto, tied in with the benefits of passive income in a way that is not speculative via Prize-Linked Crypto Accounts.

The (fake) allure of Active Trading

We have all been there at some point in our lives, a Youtube Guru driving a rented Ferrari whispering sweet nothings on our newsfeed about how their online course (on discount) is going to turn the viewer’s life around through Active Trading in the crypto markets via quick and easy strategies

🚩❌ 🚩 ❌ 🚩 ❌ 🚩 ❌ 🚩❌ 🚩 ❌ 🚩

Trading looks easy from the outside, what can be so hard about accumulating cash through short-term price swings, buying low and selling high, or experimenting with fancier tactics like margin trading or options trading? Sure, successful traders can make a killing, but let’s not forget the downsides and challenges that come with it.

The Limitations and Challenges of Active Trading

1. Time and Effort: To put it shortly, you need to know what you are doing. Active trading demands constant attention, with traders needing to be glued to their screens, analyzing market trends, and executing trades promptly to be successful. This lifestyle (unlike the Tik Tok videos) can be mentally and emotionally exhausting, requiring immense patience. In fact, studies show that active traders spend an average of 8–10 hours per day monitoring the live market, leaving little time for other activities and resulting in a work-life imbalance.
2. High Risk: Active trading is not for the faint of heart. Despite their best efforts, even experienced traders can fall victim to the unpredictable nature of the market. Research indicates that a staggering 90% of active traders fail to beat the market consistently, highlighting the high risk involved. One wrong move or an unfortunate event can lead to significant losses, with studies revealing that approximately 75% of day traders experience losses in their first year.
3. Difficulty in Consistently Beating the Market: Outperforming the market consistently over the long term is a challenging task for even the most skilled active traders. According to a report by S&P Dow Jones Indices, over a 15-year period ending in December 2020, around 87% of actively managed US equity funds underperformed their respective benchmarks. 🤯

Buffet Knows

Enter Prize-Linked Crypto accounts into the market

Prize-Linked Crypto Accounts offer a refreshing alternative that combines the excitement of daily active engagement of holding and earning on assets with the opportunity for passive income. It is an age-old concept that has worked extensively well over time in the traditional market (Over £200B held in PLS accounts in the UK alone) and is a simple concept that introduces a layer of gamification on top of savings behaviour, providing a community of holders the chance to earn regular cash rewards without the need for active trading or risk-bearing actions on an ongoing basis.

1. How Prize-Linked Crypto Works

Prize-Linked Crypto platforms function similarly to traditional savings accounts but with a captivating twist. Participants deposit their crypto assets, and instead of receiving fixed interest, they win yield via games of chance with their probability akin to how much they hold in their account. The collective interest of the deposit pool of contributors powers the prize payout and gives the user a regular variable interest (vAPR) while also giving the user the upside to passively win the whole pool of interest accrued week on week without having to take any active management or risk with the funds they are holding over time.

2. Benefits of Prize-Linked Crypto

a. Passive Income: Prize-Linked Crypto allows participants to generate passive income without the need for active trading or extensive market knowledge. By simply holding their assets in the pool, users have a chance to win prizes regularly, making it an enticing option for those seeking an exciting alternative to traditional saving/hodler methods.

b. Accessibility: Prize-Linked Crypto platforms are designed to be user-friendly and accessible to everyone. Novice investors can easily participate and potentially reap rewards, levelling the playing field and expanding the reach of cryptocurrency investments to a broader audience existing out of crypto native communities.

c. Reduced Risk: Unlike active trading, Prize-Linked Crypto eliminates the risk associated with market volatility. While it doesn’t guarantee returns, participants are not exposed to the same level of risk as active traders. Even if they don’t win a prize, they retain their initial investment, creating a more secure environment for passive income generation.

d. Engaging and Fun: Prize-Linked Crypto injects an element of excitement and anticipation into the traditional concept of saving or Hodling. The chance to win rewards enhances the overall experience, making it an engaging and enjoyable endeavour.

I speak more about our experience in building Klink in the above podcast

Don't just take my word for it

Prize-Linked Savings has been studied for quite some time in the traditional world and how it has taken effect in improving financial behaviour. By combining the allure of gamified yield/interest with the benefits of holding assets over time researchers have concluded,

1. Increased engagement: According to a study conducted by Deloitte, gamification can increase engagement rates by up to 100%. By applying game elements to savings apps or platforms, individuals are more likely to actively participate in managing their finances and maintaining good saving habits.
2. Higher savings rates: A study by The Center for Financial Services Innovation found that individuals who used gamified savings apps saved an average of 40% more money compared to those using traditional savings methods. By introducing challenges, rewards, and progress tracking, gamification motivates individuals to save more consistently and in larger amounts.
3. Long-term habit formation: Research from Stanford University shows that gamified experiences are effective in building long-term habits. By integrating savings goals, progress bars, and reminders into a gamified savings app, users are more likely to develop sustainable saving habits that continue beyond the initial engagement.
4. Positive behavioural changes: A study published in the Journal of Consumer Affairs revealed that individuals who used gamified financial apps reported positive changes in their financial behaviour. Participants exhibited greater self-control, reduced impulsive spending, and an increased focus on long-term financial goals, leading to improved savings habits.
5. Financial education and awareness: Gamification can enhance financial literacy and awareness. A report by the Filene Research Institute found that individuals who engaged with gamified financial education platforms showed significant improvements in financial knowledge and decision-making skills. By incorporating educational components, gamification helps users understand the importance of saving and making informed financial choices.

Final remarks

When it comes to cryptocurrencies, there are different paths you can take, and they come with their own perks and risks. Let’s talk about prize-linked crypto accounts first because in our view they have the ability to service a key proportion of the next market cycle. These accounts encourage you to save up, get more people into the crypto game, and keep things nice and safe. Plus, they’re perfect if you’re looking for a simpler and more secure option. On the other hand, we’ve got crypto trading which entails a volatile journey, with an unlikely chance of quicker returns.

When it comes to choosing between a prize account and trading, you have to think about your financial goals, how much risk you’re willing to take, and how well you know the crypto market but whatever you do, do not take advice from the online gurus, you will thank me later.