Set Protocol has released its social trading platform, which aims to connect users with high-profile individuals who are looking to monetize their market expertise.
Launched in April 2019, the Ethereum-based decentralized protocol lets users mint and hold tokens, or “sets,” which represent baskets of cryptocurrencies that automatically rebalance based on various technical indicators.
Since then, the platform has grown to provide 20 different sets. There are now over 1,600 unique addresses who own a set, the company’s CEO Felix Feng told The Block, and around $2 million in its system.
The new social trading platform builds on Set’s existing system. Professional traders can apply to join the platform and charge an entry fee from everyday users who wish to purchase their “sets”.
The platform currently has 10 professional traders – including Turkish trader Fidelitas Lex, prominent DEX trader CryptoCat, and Wyre CEO Michael Dunworth – with 20 unique strategies. Feng revealed that the company's goal is to bring on hundreds of professional traders by the end of 2020.
In making these onboarding decisions, Set tries to consider both their trading expertise and their online influence, Feng said.
“It's really important to onboard really skilled traders,” he said. “We also try to get an understanding of their following and how big is the community that they can onboard onto Set.”
The platform, in essence, is built on the concept of trend trading, which Feng argued will work for at least the next couple years due to the nascent nature of the crypto market. After that, however, the system will have to employ much more sophisticated trading techniques.
“[Crypto] doesn’t have a clear valuation model and there aren’t a large number of institutions who have committed capital into crypto. You can have large whales manipulate the price at the moment," he said. "So I think trend trading is still something that will work for the next few years...But people will get smarter and smarter.”
At the same time, Feng believes that cryptocurrency trading has always had a social element to it.
“Crypto is an inherently social phenomenon that is fragmented across Telegram, Reddit, and Twitter,” he said. “We’re just formalizing this into a protocol.”
In Oct. 2019, Etoro launched a similar “CopyTrader” feature for amateur traders to copy professionals’ trading strategies.
But according to Feng, the U.S. is still relatively behind when it comes to social trading while European countries like Germany and the U.K are leading the field. In fact, the U.K. already has regulations in place to issue licenses to social trading platforms, he said.
"Social trading taps into a value prop for traders that's really global, which allow them to garner a following without doing all the work of setting up the legal infrastructure," he said. "This is something that we haven't really fully appreciated in the US, but has actually been a budding field in finance for the past decade in places outside of the US, particularly Europe."
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