Crypto Trading as Spectator Sport: A Sign of Things to Come?

The recent Korea Blockchain Week featured a novel event: a live, e-sports-style competition where traders battled it out in perpetual futures trading on decentralized exchanges (DEXs). While generating excitement and entertainment, this raises questions about the increasing gamification of investing and its implications.

What Happened?

Perp-DEX DAY, organized by ReboundX and UmbrellaX DAO, showcased six different perp-DEXs in front of a live audience. Traders, organized into teams, used real capital to compete for the highest portfolio growth within a set timeframe. Real-time profit and loss were displayed, and commentators provided play-by-play analysis.

A perp-DEX facilitates the trading of perpetual futures on-chain, meaning transactions are managed and settled on a blockchain via smart contracts. This eliminates intermediaries but also introduces complexities and risks.

The Allure and the Risks of Gamified Investing

Fintech companies are increasingly incorporating game-like elements into their platforms to attract and retain users. This includes features like leaderboards, copy trading, and social stock promotion.

Pros:

• Accessibility: Gamified apps can make investing more approachable for beginners.
• Convenience: They often provide easy and inexpensive ways to start investing.
• Encouragement: They can motivate users to save more through automated contributions.

Cons:

• Addiction: Gamification can lead to excessive trading and increased risk-taking.
• Reduced Due Diligence: The focus on entertainment and competition might overshadow careful analysis and research.
• Gambling Mentality: Short-term, high-pressure trading, especially with derivatives, can resemble gambling.

Studies have shown that gamified nudges can amplify risk-taking and that social features can lead to trading in promoted stocks without proper research.

Key Takeaways

• The gamification of investing is on the rise, with the potential to attract new participants and encourage saving.
• However, it also carries significant risks, including addiction, reduced due diligence, and increased risk-taking.
• Investors should be aware of these risks and prioritize financial literacy, sound investment strategies, and professional advice when necessary.

Ultimately, while competitive crypto trading may be an exciting spectacle, it's unlikely to be a suitable investment strategy for most individuals. Understanding your risk tolerance and conducting thorough research remain paramount in the world of finance.