Opening up the trading app or browser version of many cryptocurrency exchanges will more often than not, result in you seeing a banner with a crypto trading competition. We aim to address the question “Cryptocurrency trading competitions: who benefits, and the issue of competitions in a regulated market”.
At the time of writing Binance is flashing a big red banner advertising a BitTorrent trading competition with 100m BTT up for grabs. Binance aren’t the only exchange with such a competition running, OKEX has one for TKT and many other exchanges have them currently ongoing.
What are crypto trading competitions
Crypto trading competitions reward those traders with the highest trading volume (buys and sells) of a particular coin for the duration of the trading competition. Some exchanges have a flat rate prize system, rewarding the Top-10 or Top-50 traders a pre determined prize. Binance BTT trading competition rewards have a different prize share distribution:
Top 100 traders receive a share of the 100m BTT based on the following equation:
(Each user’s trading volume / Top100 users’ trading volume) x 100,000,000 BTT
This sort of competition is similar to those deployed by online casinos and online poker sites in the past (and in some cases the present, more about that later). These competitions rewarded players of online slots or online poker based on the amount of spins they played during a given period, or the amount of rake (house percentage on each completed hand of poker) paid in a given time frame.
Cryptocurrency trading competitions: who benefits and can I win
Can I win, well the simple answer to this question is yes. The more in depth answer would have to be probably not, at least not in the crypto trading competitions run by Binance (although we could never state this as fact as it is impossible to tell what your trading capacity is).
So in Cryptocurrency trading competitions who benefits? Well the prize winners certainly benefit from the prize they are rewarded with when the competition ends. The Exchange offering the competition certainly wins as they gain from the exchange fees paid by the added trading activity on that coin. The people behind the coin benefit to some degree as they gain exposure for their coin among the traders on that exchange.
Can you trade and win in the Binance BTT trading competition? Well we can’t possibly look into your wallets but Binance is kind enough to produce a leader-board for you to judge for yourselves.
Binance BTT trading competition current leader-board at time of writing;
- ac***@***.fund amount traded 36,280,590,721 BTT
- 13***@***.com amount traded 6,487,815,631 BTT
- ar***@***.com amount traded 6,456,291,117 BTT
One thing is for sure, our pockets aren’t deep enough to compete with the top-3 and it looks like nr.2 and 3 aren’t big enough to compete with the leader (Who’s email address interestingly ends in .fund which could lead you to think that this is an organised trading fund/group).
Of course Binance will argue that anyone can win a prize as they are also offering a “Lucky draw” prize as well. 50 lucky Binancians will win 1m BTT in a random draw (must have traded 5m BTT in the trading competition period to qualify).
Why would regulation affect these trading competitions
This is purely supposition on our part, but trading competitions create an artificial market for the duration, and some investors will over stretch their resources in an attempt to “win” a prize. With the price of the BTT token primarily ranging between 24 and 26 sats (briefly touching 23 and 27 sats), and the sheer volume of trading being done by the nr.1 in the leader-board, the price is effectively being traded within a 14% profit and 14% loss range. If and when the main trader decides they have traded enough to win the lions share of the prize (and have collected enough BTC trading profit in the process), smaller traders can be left with holdings they cannot easily get rid of at the prices they have purchased them at.
A 14% loss would be a significant loss for a small time investor to incur, and with the main traders almost certainly employing trading bots they can turn on and off at will, it will certainly trap many.
As we mentioned earlier, online casinos and poker rooms offered similar promotions, and this resulted in huge losses for the smaller guy trying to scoop a prize as they would stretch their normal capabilities and wallets to try and win big. This sort of competition preyed on the human competitive nature and produced an artificially added gambling component. Many countries have initiated laws to combat this.
The UK gambling commission (UKGC) has clamped down on the online gambling industry as a whole. Such competitions were deemed to create reckless gambling and were banned, along with certain kinds of “bonus” advertising. They went one step further as many people ended up with significant problems due to these practices and introduced GAMSTOP a system of self-exclusion for problem gamblers, and restricting casinos not on GAMSTOP from obtaining a licence from accepting UK players. Many of the cryptocurrency casinos don’t accept UK players because of the bonus and gamstop restrictions and continue to offer bonuses and competitions that are outlawed.
France has regulated their market under the Arjel program, and Sweden (SpelPaus) has followed the UKGC, and the Netherlands is introducing CRUKS along the same lines.
Any regulated cryptocurrency market would almost certainly clamp down on these practices, certainly in countries mentioned above, as they remove the “fair and safe trading” environments from normal purchases and traders for the duration. An article on medium by “Cryptokanoon” covered the situation as seen in India, and we feel this will be replicated by many more countries as regulations become more prevalent.
Will trading competitions disappear entirely
Almost certainly not, as we have seen in the gambling industry, it is possible to exclude residents of regulating countries from all competitions. Exchanges operating in regulated countries will simply be able to exclude those residents from these competitions and thus circumvent regulated areas.
If you have the deep pockets needed and understand the risks, then by all means enjoy the competitions. Personally we stay away from them and from purchasing the coins during these competitions due to the artificiality of price. Whatever you decide, please always ensure you DYOR and trade safely and within your means.