Why are cryptocurrencies attracting so much interest?

We've all noticed that crypto is incredibly popular right now. Today, we're hearing about crypto everywhere, from the news to magazines. But where does all this interest come from?

Andrea Unger discussed this with Debora Rosciani, journalist and host for Radio 24 (IlSole24Ore Group), Italy's top financial radio station.

In addition to identifying the main reasons why crypto is so popular, Andrea also pointed out that the most sought-after financial products are often subject to scams and dishonest practices, and offered some useful tips to avoid possible risks in this area.

Here are some of the topics discussed in the interview: 

- Why is there so much interest in crypto, both from investors and the media?

- What steps are the authorities taking to protect investors?

- Why has CME introduced regulated products based on Bitcoin and Ethereum? Is it worth trading on them?

Enjoy the video!

Transcription

Debora

First Forex and then crypto. Is it necessary to follow trends in investing? We'll talk about this with Andrea Unger, four-time World Trading Champion.

Welcome back! Today we're going to be talking about cryptocurrencies. Cryptocurrencies represent a major trend and innovation, leading central banks to also work on their own digital currencies. We're talking about a highly engaging technology and an investment category in which we're wondering how much and in which manner we should invest.

When we talk about crypto perhaps not everyone has a clear idea of the financial structure behind this sector. Too many people think that it's an investment instrument identical to all the others.

I'd like to share with you a recent statement by Fabio Panetta, a member of the Executive Board of the European Central Bank, who said, "Crypto-assets don't just represent a high-risk speculative investment. They even pose a genuine threat to financial stability. So, we must take action to bring crypto-assets back into a clear regulatory framework that today is still missing." So, this appears to be an outright attack, if we can call it that, towards the 10,000 crypto assets currently in circulation and have a total value of $1.3 trillion.

But they lack the fundamentals. They're frequently used for illicit purposes, have high volatility in terms of price, and in many cases, Panetta said, are subject to embezzlement. So, we need to clarify what kind of market we're talking about and especially today we're talking about crypto trading. And obviously, we’re going to be doing that with Andrea Unger, the only one to have won the world trading championship four times in the Futures category. Andrea, welcome back!

Andrea

Hello Debora! Good morning everyone!

Debora

So, the purpose of our webinar is to explain to our audience that cryptos allow for diversification but we need to be very clear about some aspects.

At this moment, moreover, crypto has captured the attention of investors who were previously interested in other markets, such as for example Forex. Today they're shifting towards this world.

Andrea, if I had to explain to you about the degree of attention to this world by my audience, I would certainly say that they are much more attracted to cryptocurrencies than they used to be when investing in Forex or CFDs, which were perceived as being a bit more complicated. Paradoxically, cryptocurrency, if you find a platform that you like and convinces you, on which it is easy to open an account and invest, seems to be preferred. That's my feeling based on what our audience tells us precisely on Radio 24. You do hundreds of courses. You meet thousands of people. Do you perceive the same, or has more or less every moment in financial history had the same number of followers who fell for a fad?

Andrea

Well, as a trader, no. I perceive the same naive approach that was there before. In the sense that there are people who approach the world of trading. They come to me because they think I can help them. These people, however, assume that today there is only one world, the crypto world. So they make the assumption that "I trade on crypto because there is only that."

Before there was only Forex. You know, trading was Forex. Trading was Forex with MetaTrader. There was nothing else. They didn't even realize that those markets they were trading on aren't regulated. Sometimes they're even ghost markets made by market makers. They didn't realize that the financial market is entirely something else. And today the same thing is happening with the crypto world.

So I think the naive approach is pretty much the same. What's more, is that today, in the crypto world there’s no longer the leverage that Forex used to offer. So with little, I can dare a lot. Today there is the expectation effect of the eventual crypto's run. So, I can do so much today with little because I expect a certain instrument to perform amazingly. Which from a certain point of view is better that way, because in any case, one says: all right, I lose what I put in but if I do well, I'll make a lot. Whereas with leverage, when one went with leverage at the highest levels there was a risk of losing more than the capital invested.

However, the crypto world offers so many other opportunities that aren't just pure trading. All opportunities that I'm happy to be able to explore in an algorithmic way. Because where I can calculate with numbers what might happen I'm very happy, because at least I can do what I always say, which is a detailed enough plan of action to know how to react.

And the crypto world allows us to do so… Clearly, there are so many opportunities to make money that aren't the pure get-in, get-out trading and so on. Just think for example of cryptocurrency staking or of other opportunities on DeFi, in this case. I don't want to go into too much technical detail or use big words that maybe some people don't understand. But here's the thing, anyone who doesn't understand those words needs to be careful because it means they don't have the basic skills necessary to understand where they're going with this. 

Because I don't want to make the equation "unregulated market equals dangerous market." I don't want to do that because I also trade on cryptos, and so I trade on an unregulated market, so I also expose myself to danger, if you will. But I know what could happen because I know the instruments I trade on. And most of all, barring a last-minute bang on the head, I shouldn't fall, I say "shouldn't," fall victim to the scammer on duty, because today the scammers gravitate to the crypto world. Because they once used to be on Forex. The calls at home were coming in about Forex opportunities. Today we have the calls about crypto. You know, I still remember the days of the calls about Nasdaq in the early years...

Debora

In 2000...

Andrea

Yes, and now... Then there was Forex and now there are cryptos. And cryptos clearly if I don't know what I'm getting into, the first guy who tells me the story of the day, well I'm going to fall for it. I'll give him my money and I'll never see that money again. That's for sure. That's mainly where the point is: be careful where you end up, that's it.

Debora

Andrea, I’m going to ask you now a question that I wanted to ask you later, but you raised the issue of the unregulated market. So, if this aspect is true for crypto, it's very important to consider when we treat cryptocurrency as an investment class like any other... This is a very relevant aspect of non-existence on which the authorities have been working for some time to figure out what regulatory framework to build around this revolution. However, if it's true that cryptocurrencies aren't fully regulated, how come we find them or we find crypto-related instruments for example on the CME, the Chicago Mercantile Exchange, which is a world that you know very well?

Andrea

Well, the opportunities. You know, in the sense that the Chicago Mercantile Exchange I think, without wanting to be malicious, also had some fear of seeing a shift of traders from the regulated world to the crypto world, in this case. And so, to avoid this shift, it tried to shorten the path, to say, "Wait, why do you have to go to crypto? I'll give you bitcoin futures, stay with me. I'm regulated and you trade here with me on Bitcoin futures." Today there is also the Ethereum future. And so, it avoided the migration of traders elsewhere.

Except that its futures on Bitcoin were extremely expensive in terms of margins. It had pretty hefty spreads. I traded it for a while. Eventually, I dropped it because there were too many operating costs for what was the remaining de facto opportunity for profit.

And so, there was this overlap. Then again, look, I don't want to be malicious. I think that the institutional world is more interested in the regulation of the crypto market more out of self-defense or fear of the impact that this might have by reaching a certain size on what we may call the "traditional finance." So, it tries to play it safe by saying, hey wait, let’s put the rules here so we control what's going on as well.

And it’s obviously protecting itself, but that's legitimate I'd say, but also everyone who still relies on that world. Because if the crypto world could be able to destabilize traditional finance, clearly all of our savings, and I guess you have them too, all our savings in the bank could be in jeopardy or in any case put in a somewhat difficult situation. So, I'll be happy if they can regulate this market as painlessly as possible.

Of course I have no idea, I don't know what will happen, but indeed the crypto wave is very strong. In a way, many people are forced to adapt to what's happening. Because in any case there's such a mass interest that leads to turn to this new reality that you can't curb. They try in so many ways, but in the end they all get there. Even in those countries that have banned access to crypto, somehow people still get there.

Debora

Andrea, financial scams continue to be many, very widespread, and they not only affect the most innovative investment instruments, but they also trivially affect our bank accounts. So, we really have to be careful, at every moment of our day, not to run into some misadventure of this kind. Certainly, the fact that we talk a lot about cryptocurrencies has generated a lot more attention and therefore a lot more opportunities for fraudsters to equip themselves to propose to the public, for example, some new platforms where people should be able to trade but that perhaps don't really exist. I mean, the sophistication of the scam is always very broad. But aside from that, what do you think has generated so much media attention into cryptocurrencies? I don't know, maybe even the mystery related to the creator of the first crypto? What aspects are also particularly "fascinating" in the eyes of the press, to the point that they often talk about this world and I don't always say knowledgeably, unfortunately.

Andrea

I think there are several motivations. Now aside from the fascination of the mysterious creator. But let's also just think about the technological idea behind the whole blockchain. By the way, I've said this on other occasions, and I think it would be a very good opportunity for application in other areas. All the security, let's say, that's behind the idea of how a blockchain works in my opinion could open doors in the future for quite a lot of transactions that today are done in a very bureaucratic and cumbersome way. It could streamline a lot if applied properly in the world of traditional bureaucracy.

So, the technology and the idea that a technological innovation related strongly to the computer, since it's the computer that does the mining, could become an asset. A currency that isn't even a currency, it's a commodity, or whatever. However, something that has a price and gets listed on a normal circuit, becoming a commodity.

It's automatic that this generates curiosity and interest. Because just as it generates curiosity in those who hope to make money from it, it also necessarily generates that curiosity in the media who follow the waves that are there and then, let's face it, they have to write, you know, they have to write what people want to read. Because if I write the best article in the world that nobody is interested in, however, no one will ever hire me as a journalist. If, on the other hand, I write something that gets the attention of the masses, I'll be read and my name will stand out in the headlines. So, I'll be welcome, I think, in major publishing houses. Because they know that my articles are of interest to quite a few people. So, it's normal. There's interest from there. I write about that and there's a whole wheel turning.

Debora

Also because, otherwise, we are accused of not giving adequate attention to certain phenomena that are perhaps of very significant dimensions around us, of neglecting them. And so, even for us actually to move properly in this world of such major changes isn't easy. Because you have to take measures, and above all, we must never forget that we are talking about people's money, people's investments, and so we have to be extremely cautious even in the way we deal with certain topics.

Wrapping up Andrea, what are we talking about when we talk about the Unger Method applied to systematic crypto trading, so let's end our talk with some so-called instructions for use.

Andrea

Well, the Unger Method is, as I've always said, a common-sense method of developing trading systems and approaching the market. I do it numerically, and when I say "numerically" you shouldn't be afraid and think, "Oh my Gosh, now he's going to bring up NASA numbers".

It's a step-by-step method that plans what needs to be done. It verifies strategies based on the past trends to hypothesize how they may perform in the future, thus studying the market trends. This is for both traditional systems and other forms of investment where there are edges to be discovered in favor of the investor that must be evaluated and then schematized, to build a plan.

So the Unger Method takes all the pieces, lines them up and decides what needs to be done. It decides this before it puts money anywhere. When it invests, it already has everything clear about what must be done, let's say.

Debora

Let's close on this conversation with Andrea Unger who has shared with us the correct spirit, the right one, the one suitable for investing in this very complex market. But it's a constantly evolving market and I think that we can say that this will certainly not be the last of our conversations on this topic. Thank you and keep up the good work!

Andrea

Thank you and goodbye everyone!

Debora

Before we say goodbye, here's a last service announcement. For all the people who'd like to delve deeper into the concepts we have explored during our conversation, you can order Andrea Unger's book, "The Unger Method," which is available on the Unger Academy website. You'll receive the book at your doorstep. It's free, and you only have to cover the shipping costs: so happy reading, everybody!

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