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So-called Stablecoins are no longer stable. The recent crypto crash has hurt retail investors and institutional investors alike. But underneath, it’s likely the small retail investors who will come away most harmed by the recent crypto crash.

To understand why retail investors are the ones getting the short end of the stick, we can look to stock market returns. An analysis of 2018 returns found that the average retail investor lost about double the total market loss (Dalbar). 

The same trend is likely playing out with crypto.

Without the tools and strategies available to institutional investors, individuals tend to make decisions based on emotion. In a market downturn, fear can drive institutional investors to panic, and panic means bad decisions.

In today’s crypto market, many retail investors are considering exiting crypto altogether. So not only have they experienced a dramatic loss, but they’re also positioned to miss out on the benefits of the subsequent upswing we know is only a matter of time. 

It’s old news that retail investors are disproportionately vulnerable. What the crypto community needs to pay attention to is that this vulnerability isn’t necessary. With tools currently available, retail investors can mitigate their risk and make sound investment decisions, even during market volatility.

Small investors need to overcome this disadvantage. Risk management shouldn’t be available only to big Institutions.

To avoid even more panic, the crypto community needs to get serious about risk management tools. In keeping with the spirit of decentralized, open-access finance, risk management tools should no longer be kept behind the brass doors of big banks. What’s new and exciting about crypto is that individual investors finally have access to such management tools.

Retail investors don’t need to feel powerless in the recent market downturn. One of the primary reasons people lose money in investing is that emotions get in the way. Our initial investment strategies are logical, but once the market starts to move south, fear and panic cause us to deviate from our plans. 

Removing that emotional response is proven to increase investment returns. A 2018 study in the Journal of Financial Planning found that investors who took emotions out of the picture through a behavior-modified strategy gained up to 23% higher returns over 10 years. 

It all comes down to how retail investors can actually remove emotions from their investing. It’s easier said than done. To err is human, and we’re all vulnerable to emotional decision-making. Which is why I'm betting on bots. 

The advantages of AI-powered investing are clear. Human investors can set up their trading strategy and define their risk parameters. There are numerous free trading bots, so it’s easy for people to find a bot that fits their risk preference and trading strategy. But after that initial decision, the execution is left up to the bots, which are impervious to emotional factors. With bots, investors can faithfully execute their original strategy. Plus, humans don’t have the bandwidth to monitor the market 24/7. Bots do that for investors, leaving them free to pursue other interests and take care of other responsibilities.

We can’t remove volatility from any market. That’s why risk tolerance and risk mitigation are key to crypto’s recovery. With the right technology, we can level the crypto playing field and help all investors grow their wealth. If we learn one thing from the recent market crash, and all the pain and anxiety that has come with it, let it be that the market is inherently volatile. Your investment strategy shouldn't be. The time has come to empower retail investors with tools for consistent decision-making.