Now that we’ve gotten to a new age where trading is as easy as taking out your phone, opening an app, and trading, a new question arises. Should you be using a broker’s app to trade crypto? In the short time we’ve had crypto apps in operation, what have we learned about trading habits, and is it all good or bad?
In this article, we will use Gamestop, a well-known example that exemplifies broker apps’ negative and positive sides. Last year Gamestop was a victim of one of the largest inflation scandals in online trading history. A group of home traders got together on Reddit and orchestrated a move against hedge funds that had shorted the company’s stock. They inflated it to $482, the highest it had ever been, made a lot, and cost billions to many, including the hedge funds. A move that was only made possible by trading apps.
So if you’re wondering how is this relevant to crypto? Here is how.
What are the Differences Between Trading Apps and Exchanges?
Trading Cost
It’s way cheaper to trade crypto on apps than it has been on traditional forums. Apps such as eToro, IG, and Trade Nation offer fee-free trading, which is attractive to most crypto traders beginning and established in the industry. And we don’t know about you, but we quite like not paying to access the market.
The Market
Trading apps broaden your market by giving you access to different cryptocurrencies on different exchanges. You have the option to transfer crypto from one exchange to another using simple, uncomplicated steps. You don’t have such flexibility while trading directly on an exchange.
You Can Copy Trading Strategies
If you’re just starting trading and don’t know much about it, you can copy and paste a strategy from a trader you trust. Instead of using a crypto fund or implementing trading strategies you’re uncertain of, you can use one a trader with a proven record is using. As such, trading apps make your life easier and significantly increase your chances of success.
How Does the Smartphone Tip the Balance?
A study conducted through two German banks found that access to features on desktop versions of a trading app on mobile increased trading activity. Smartphones also increase people’s risk perception, making them more likely to make bold decisions while trading market-leading assets. Therefore, you might take more risks while trading on an app on your phone, which more likely than not leads to losses.
Furthermore, this type of trading persisted even after moving back to a desktop version of the application, suggesting that having easy access to crypto markets greatly alters one perception of crypto trading.
What About Gamestop?
Now to the dark side of this coin. All these good factors with crypto trading apps come with a caveat. Because of the convenience, ease of use, and access to complex financial tools, you can easily become addicted and have self-control issues. And as the German report showed, you’re also more likely to take risks you would have otherwise not taken, which could lead to devastating consequences.
On the other hand, when orchestrating trading bubbles becomes as easy as a few home traders organising an attack on Reddit, we have to ask who’s safe. Gamestop’s shares rose to astronomical heights that their shareholders and employees would have never thought of reaching, only to find out it was an online meme. The stress they had to endure and the reputation hit the company took might take years to repair.
Furthermore, you can replicate this type of attack on a cryptocurrency, which could lead to you making investment decisions based on the wrong information.
However, we are also glad that now every day, Joe can influence the markets in ways previously only reserved to hedge funds.
Bottom line
Cryptocurrencies have come a really long way to what they are today. They have helped usher in a period of financial freedom and access to financial instruments previously only reserved for big industry players. Now you have all that power in the palm of your hand, and the limit to what you can achieve is left to your imagination. So to answer the question if you should use broker apps for crypto trading, the answer is yes. But we hope you do so in a considerate way.
