Finance can be weird these days. R/wallstreetbets, a no-holds-barred subreddit populated by retail investors and amateur stock-flippers fond of the Robinhood trading application, was ground zero for the orchestration of January 2021’s GameStop short squeeze. During the event, the stock price of the ailing video game retailer was sent skyrocketing to unfathomable highs, mostly for lolz and to take on established institutions. On Twitter, SpaceX CEO and Tesla Technoking Elon Musk – follower count: 59.3 million as of August 2021– has indulged in flirting with market manipulation with abandon, by tweeting not only about his own companies but cryptocurrencies big and small. His absurdist posts regarding Dogecoin, a crypto-token intended as an in-joke and represented by a quizzical shiba inu pup, have become especially notorious. While it is impossible to ascertain the exact impact of Musk’s online Doge-related tomfoolery, it is a fact that the price of Dogecoin has grown from $0.005 in January 2021 to $0.31 in August.
The internet, cryptocurrencies, user-friendly trading platforms, and a pandemic-induced glut of spare time have gelled into a perfect storm that has redesigned retail trading as something that feels more like a game, and has transformed social-media friendly investors into quasi-influencers.
But this isn’t a new phenomenon: Israeli trading platform eToro, which launched in 2007, has been pioneering what the industry calls “social trading” features for over a decade. Users on the platform can follow other traders, check out their performances over time and, if they are keen, copy them, by asking eToro to automatically apply the popular investor’s strategy to their own portfolio. The most copied popular investors are rewarded by eToro with perks and a monthly payment of up to 2.5 per cent of the yearly average amount of money invested by their copiers.
Who are the UK’s most popular eToro investors? Their backgrounds range from the conventional – a past in finance or consultancy – to the eclectic. You get no prize for guessing what Britain’s most copied, Jay Edward Smith – who lives in the south of England, has about 30,000 people mimicking his strategy, and is pretty bullish on cryptocurrency – used to do for a living before his life as a full-time eToro trader: he was a professional gamer and eSport organiser.
“That experience helps with trading,” Smith says. “If you look at games like chess, poker, strategy PC games like Dota and StarCraft, they all have this crossover with investing and trading. All of those games are about risk management.”
“In addition, I previously ran big eSports tournaments around the world, travelled to them, participated in them, and I was very used to the kind of online multicultural community that is present on eToro as well.” True to his gamer’s nature, Smith uses Twitch, the video game live-streaming platform, to keep in touch and exchange ideas with his copiers and followers. “My account on Twitch existed before Twitch existed – when [the platform] was still called Justin.tv,” he says.
South Africa-born Heloise Greeff – third on the UK’s leaderboard with 20,700 copiers – prefers to use YouTube, and regards herself as a “financial educator” rather than influencer. Unlike Smith, she is not a full-time eToro popular investor; like Smith, she has managed to harness her pre-existing professional skills to triumph in the online trading arena. As an Oxford AI researcher with a background in biomedical engineering, Greeff thinks that trading and designing machine-learning algorithms are “very complementary skills.”
“I rely heavily on machine learning for both my fundamentals and my technical analysis,” she says. She has a tool able to mine “strings of words” from eToro and Twitter feeds in order to intuit where the market is going. She has also designed a proprietary algorithm to decide when to enter and when to exit financial positions. “In my daytime job, I use vital-sign data to predict when patients are going to deteriorate,” Greeff says. “You can use the same thing to predict when markets are going to deteriorate.”
As the world’s health conditions deteriorated – to wit: during the Covid-19 pandemic – more and more people popped up on eToro. In the first quarter of 2021, the platform gained more than three million new users, passing 20 million global users in June 2021. It’s possible to argue that this shift has democratised finance, millions of everyday people are trying their hand at trading, building upon – Greeff says – an unprecedented access to high-quality online data sources. On the other hand, markets could collapse in an orgy of nihilist irony.
“I do see it increasingly among the younger generations: they have a sort of ‘don't care’ attitude towards losing their money, towards investing in risky things,” Smith says. “This meme culture and joking about their investments – I think it's gonna be a strange future, but I'm excited for it as well.”
Smith says that while he is not normally an investor in “meme stocks” and Dogecoin (which eToro made available for purchase in May 2021), “that doesn't mean that you can't have some exposure to it.” But when does he decide that a meme is no longer funny? “Normally, when I've made a good amount of profit,” says Smith.
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This article was originally published by WIRED UK
