When the recent Corona Virus panic hit Crypto Markets as well as stocks and other assets, it seemed like there were no winners over the course of a few terrible days – this has now proven to be wrong.
As data released by Coinrule, a platform that makes it easy for beginner traders to build automated trading strategies, shows, Coinrule users have managed to remain in profit by a combined 67% throughout the worst market crash since 1987.
Even in absolute numbers, most of the active Coinrule users are in profit, despite a once in a generation market crash that even overshadowed the 2008 Financial Crisis.
Source: Coinrule Data – Three-Month User profits
Why this Matters
Market crashes do produce winners and losers. Until today, you could assume that professional investors, algorithmic funds and hedge funds, i.e. those with the clout, expertise and tools, would be the ones to come out of a crash untouched while hobby-investors suffer the worst as their portfolios are wiped out.
When markets dropped over 30-40% across March 2020, Hedge Fund Pershing Square reported $2.6 billion in profits in less than a month. Famous investor John Paulson posted profits of over $2bn at the height of the 2008 Financial Crisis.
This is why the data coming out from Coinrule is particularly stunning. With a user-base of over 50% of beginner traders, Coinrule’s users were still able to either remain in profit or at least to minimize losses and therefore to significantly outperform the crashing market.
How did they do it?
Beating the market in a crisis did not require as much skill as the average investor might have assumed. Having an automated strategy in place that protected the user’s portfolio and sold crashing cryptocurrencies such as Bitcoin (down 41%) or Ethereum (down 42%) into Stablecoins such as USDT is what made the difference for most Coinrule users.
Additional profits then came from selectively buying back the dips and benefitting from the extremely volatile market, something that only a user with an automated trading strategy is able to do.
Source: Trading View – BTC Crash in March 2020
While Stop-Losses are well-known market instruments, the sudden and fast nature of the crash meant that many beginners on traditional trading platforms woke up to see that markets had dropped right through their Stop-Losses without triggering them.
On the other hand, Coinrule’s users seem to have benefitted from their automated strategies being able to place sell-orders as often as necessary for these strategies to trigger, no matter in what state the market found itself. As a direct result, Coinrule users were able to exit their positions while traders without automated strategies were not.
What next for the market?
It is easy to overlook this specific battle in the wider biological and economic war against the Corona Virus. Yet the long-term impact of this news on the financial market could be one of the biggest events to happen for hobby-investors in the last decades. Technology is starting to democratize access to investment strategies.
As the Economist wrote in October 2019, over 65% of financial market volume is run by algorithmic bots and in some of the most lucrative asset classes such as stock-futures, this number rises up to 90%. This is a market dominated by Hedge funds and Quant funds such as AQR Capital Management and others. There has so far been no way for a hobby investor to gain access to this money pot – the market was literally split into insiders and outsiders.
Coinrule’s numbers are now showing that the hobby investor is starting to join in on this market revolution. Thanks to tools for automated trading now being available to the mass market, the regular investor suddenly finds himself with a fighting chance against the professionals.
The most exciting question at this point is how long it will take and how far will this revolution go. Professional investors are not going to give up their market privileges without a fight but as we have seen across industries, once technological innovation starts to give equal access to the mass market, it is only a question of time until traditional incumbents find themselves under growing pressure.
With platforms like Coinrule, promising times seem to be around the corner for hobby-investors!