Traditional Investing Isn’t Fair. Here’s Why Crypto Is.

Traditional investing hasn’t been fair for decades.

While you’re reading this, you’re probably locked out of buying some of the most attractive investment opportunities on the market right now.

Put simply, TradFi favors a few people over the majority; it’s not a fair fight.

But investing in crypto can be. 

Here’s why.

Only 13% of People Can Invest Freely

Last week, former U.S. House Speaker Nancy Pelosi invested $5 million USD in a software company called Databricks.

Since US Congressmen and Senators are required to publish their trades, some everyday investors have taken to copying the same buys as Pelosi.

After all, Pelosi boasts some incredibly successful trades. Reportedly, she has invested more than $120 million USD in stocks to date.

But there’s an issue: this recent purchase is made up of stocks that the average investor simply can’t buy.

That’s because Databricks is a privately held company, which only accredited investors can invest in.

That’s actually a lot more common than you might think. In the current traditional investment landscape, not everyone has the same access to profit opportunities.

An accredited investor is someone who meets a fixed set of criteria. As defined by the SEC in 1982, this includes individuals with a net worth of over $1 million USD or over $200,000 USD in income.

As of 2020, it also includes “knowledgeable employees at private funds.”

It probably won’t surprise to learn that there are not many people who fit this description.

According to the SEC’s own estimation, just 13% of American households qualify as accredited investors. 

Why Traditional Investing Isn’t Fair

Around 87% of American households are prohibited from investing in stocks that haven’t reached the public market. 

The other 13%~ are free to invest in whatever they think will make money. It’s those stocks that have the potential to skyrocket the most.

As pointed out in a hearing titled Sophistication or Discrimination?, this is blatantly unfair.

According to Jennifer Schulp, who works as a director of financial regulation studies at the Cato Institute, this has left the average trader locked out of crucial investment opportunities.

During the hearing, she identified that some American households are playing at a massive advantage; they’re allowed to invest in assets that let them earn significantly more than those who can only trade public stocks.

This sentiment is also echoed in an article published by Fortune, which pointed out that this has contributed to minority groups being locked out of key opportunities to build wealth.

Supposedly, the intent behind this regulation is to protect investors from losing their money by investing in unregistered securities.

But as Schulp points out, limiting how people can invest their own money is objectionable.

Further still, she added that “the accredited investor definition gives the SEC the authority to decide who gets to invest where.”

“Public markets for most, but public and private markets for those it judges to be worthy.”

Anyone Can Buy Real Cryptocurrencies

In stark contrast to the current TradFi landscape, virtually anyone is able to buy whatever coins they want.

That’s because the decentralized landscape was designed to treat everyone as equal. True DeFi projects obey this principle.

Of course, there are exceptions to this rule. Some cryptocurrencies were launched alongside initial coin offerings (ICOs) that were first made available to a select number of whitelisted investors.

This is no better than TradFi.

Fortunately, while these projects were once common in crypto, few coins launched from these types of ICOs have proven to have real staying power in the DeFi landscape.

Today, most of the top cryptocurrencies were not launched using these unfair practices.

Regardless of your status or wealth, you are free to buy bitcoin, ether, PLS, LOAN, and hundreds of other coins. 

Anyone can invest in a new crypto, buy a coin with a strong reputation, get involved in a DeFi project they believe in, or diversify their portfolio by doing all of the above.

In other words, crypto is creating a leveling playing field where traditional investing has failed.