Meet The World's No.1 Bitcoin Derivatives Trader: "It's Pure Unlicensed Capitalism"

Tyler Durden's picture

From his small suburban home in Basingstoke, just west of London, Jay Smith - the No. 1 cryptocurrency trader at online brokerage eToro - looks for reasons to buy more bitcoin and other digital tokens.

The 29-year-old high school dropout and one-time professional video-game player doesn't mind the volatility, as Bloomberg reports, his portfolio is up 295 percent in the past 12 months... "I just put in an order for a Tesla, and I don’t even know how to drive..."

However, as Bloomberg uncovers, Smith isn’t playing with just his own cash. More than 9,000 retail investors heed his advice and copy his trades on eToro, which is licensed in Cyprus and by the U.K.’s Financial Conduct Authority. It’s a social trading network that enables clients to track their favorite cryptocurrency traders.

In an unregulated, ultravolatile market that few investors understand, eToro injects even more risk into the mix.

The firm is one of several that use contracts for difference, or CFDs, derivatives that allow investors to speculate on the price of cryptocurrencies, offering leverage of 30 to 1 on such bets.

While the U.S. largely prohibits retail investors from trading CFDs, regulators in Europe are only now beginning to address the peril they pose. In June, the European Securities and Markets Authority, the European Union watchdog for capital markets, said it was concerned about the suitability of CFDs and was weighing measures to restrict their use. Combining CFDs with cryptocurrencies is reckless, said Rainer Lenz, chairman of Finance Watch, a Brussels-based public-interest organization, who serves on an advisory group at ESMA.

“We have to put a stop to this,” said Lenz.

 

“This is selling a synthetic instrument on top of another synthetic instrument. This is the highest form of speculation. You just can’t do that to retail investors.”

Iqbal Gandham, head of eToro’s London office denied that mixing CFDs and cryptocurrencies is harmful to retail investors.

“You can’t lose more than you put in,” Gandham said. “And if you don’t know what you’re doing, just copy someone who does.

Which is where Smith comes in.

As Bloomberg details, copy trading is what separates eToro from other CFD firms offering cryptocurrency trading. EToro pays Smith, who’s not an employee, at least 2 percent of the money that follows him. As of Sept. 26, that meant he was earning about $230,000 annually on the $11.5 million in assets held by his 9,143 copiers.

For most of the year, Smith’s followers have been pumped when he livestreams his trading sessions on Twitch, a social media site.

“Feeling cryptocrazy,” one user wrote in the chat box on Sept. 5.

 

“Me cryptodrunk,” replied another.

 

“Just put 10K with you,” said a new follower.

 

Ten days later, with bitcoin and Ethereum having lost more than a third of their value, the mood of his followers had darkened. Smith’s eToro portfolio had skidded more than 10 percent and he’d lost a few hundred copiers. Those sticking with him wanted to know if this was the shakeout everyone, including Smith, had been fearing.

 

Humming to himself as he tapped the keyboard, the trader paused and told them to relax. “Hopefully you can tell from my calm attitude that I’m not in the least bit phased by this,” Smith said. “It will be over in two weeks time, and then the market will start rallying again. Nothing has changed. This just means that the Chinese can’t buy tokens so easily now. All that’s going through my head is buy the dip.”

 

As Smith talked, bitcoin started surging. Over the next few hours, it skyrocketed 30 percent from its low of the day.

 

“Look at it go,” he gushed. “It’s going insane. Let’s buy some more.”

He started buying dozens of Bitcoin at $25 each, it's now at $4250...

Smith rode out the currency’s first big crash in 2013, when it lost half its value in less than three weeks. By early 2017, he’d built a portfolio of coins from Ethereum, Litecoin and other issuers.

As Bloomberg notes, the fusion of derivatives and cryptocurrencies was probably inevitable in a market that appears to be spinning out of control.

“What we are seeing is pure unlicensed capitalism,” said Jon Matonis, a founding director of the Bitcoin Foundation and chairman of Globitex, a cryptocurrency exchange based in Riga, Latvia. “And you just can’t keep up with the market anymore.”

Regulators are scrambling to catch up.

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tmosley's picture

>unlicensed

OY VEYYYYYYYY!!!!!

El Oregonian's picture

It will only stop when the music ceases and the fat lady sachets on to the stage.

Yellow_Snow's picture

Such is the life of an 'oldbug' no-coiner...

BaBaBouy's picture

""allows investors to speculate on the price of cryptocurrencies, offering leverage of 30 to 1 on such bets.""

You just know this ain't gonna end well . . .

Escrava Isaura's picture

Not end well?

Ask the President about speculation. He’s one of the best at it.

Imperialism and speculation are the essences of capitalism in the industrial age, darling.

 

SoilMyselfRotten's picture

Sure did, he used capitalism for his gains, but sociialism(bankruptcy) for his losses. Nice gig if you can get it.

rrrr's picture

To BaBaBouy : In the meantime some people will make thirty times the amount they put in.

ArthurDaley-OldieTimeTrader's picture

"It will only stop when the music ceases and the fat lady sachets on to the stage."

 

“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing,” As Chuck Prince said in an interview with the FT in Japan.

DavidC's picture

The word is 'sashays', not 'sachets'. If you're going to use a word you're unfamiliar with, CHECK IT FIRST.

Yes, I'm in one of those moods today.

DavidC

balz's picture
Don't Confuse Genius With A Bull Market
MythicalFish's picture

"That meant he was earning about $230,000 annually" ... "He started buying dozens of Bitcoin". And this makes him the World's number one? My barista is making more money in cryptos..

adr's picture

So as the guy talked Bitcoin went up 30%?

When liquidity is that low, a single person with volume and reach can move the market in a major way. 

Decentralized my ass. 

tmosley's picture

Your problem is that you conflate different aspects together.

I suspect that you do this because you are stupid. But you might be a Jew.

GoyimUprising's picture

I see your argument and I can't find any flaws with it.

truthseeker69's picture

STFU T- 

 

You conflate government regulation with market regulation 

 

True Capitalism regulates itself - given it;s allowed to do so. 

 

 

 

nomofiat's picture

wtf do you have against jews, boy?

I like you because you get crypto but as a jew I wonder why you blame everything on us.

On the other hand it is actually a compliment. We run the world, yeah baby;) How about you step up your game instead of bitching about the ones winning!

You sound like a sore loser. To weak to compete with us jews or what?

Satoshi is a jew btw. I met him last week over at the rothschilds when we were discussing chipping all you goys for the greater good;)

 

 

 

 

 

JoeKnows333's picture

It's easy to "win" in this world when your "tribe" worships the "lord of this world", who is Satan, and you are literally the children of Samael and Lilith, that is Satan and the "mother of demons" for those that don't know.. They pretend to be "God's chosen people, but those people are the white Christians that accepted Jesus as their Messiah from the beginning! We'll see how much bragging you'll do when the REAl master of this world returns with his warrior angels to smoke your evil asses and pretenders to the throne! Zionism is just another branch of the Luciferian control mechanism of his shills and dupes. Have a nice time in the lake of fire!

VD's picture

ponzi iz az ponzi doez.

 

NSA-coinz for yet another muppet phase.

 

producing less than zero off basic blockchain maths.

Yellow_Snow's picture

Another 'oldbug' no coiner talking the talk...

Please put you money where you mouth is. Take the 30x SHORT position !  Plz Plz...

VD's picture

the same idiotic mindset that shorts an egregious ponzi is the same mindset buying into it. keep "stacking". lol

ebworthen's picture

"It's pure unlicensed Black Tulips!"

Fixed it for 'ya Mr. Jay Smith.

Hope it works out for you.

NoDebt's picture

It's Satoshi.  That dichead is probably a multi-millionarire by now.

 

Clock Crasher's picture

He probably bailed at 100.00 having been up 10,000,000,000% way back in 2000-whenever.

navy62802's picture

Crypto currencies ain't going away any time soon. They are a wet dream for anyone who wants to launder money, including the world's intelligence agencies. This is the Frankenstein creation they have been waiting for, and now they have it. This creation of financial sorcery is here to stay as long as intelligence agencies conduct black operations.

sleigher's picture

Putrid may be correct.  BTC among all the alt-coins and daily ICO's are a beta test.  Can this system actually work for international trade?  I am having trouble figuring out why they are still around and haven't just collapsed by now.  How many years has it been?  Tulips lasted about 4 years?  Bitcoin launched in 2009.  

Yellow_Snow's picture

I guess if you don't 'get it' by now... you're just going down with the ship.

VD's picture

btc launched in 2008. nsa paper 1996. two very good years to tip you off.

navy62802's picture

I would argue that this is not like tulips. This thing has actual value to people who want to conceal the flow of moneys. Which is hugely valuable to government entities seeking to conduct off-the-books operations. The Bank of Credit and Commerce International and Nugan-Hand Bank during the 1980s are both analogues to what crypto-currencies offer. These banks, exposed during the Iran-Contra Affair in the 80s, held accounts for numerous international terrorists as well as CIA assets, including Oliver North. Cryptographic currencies are the modern manifestation of these fake banking institutions. Crypto-currencies are a tool for funding covert operations world-wide. Because they hold such value for the world's intelligence agencies, I don't believe crypto-currencies will go away any time soon.

VD's picture

a. CIA can use and does use the banking system just fine to conceal as they've been doing since inception

b. if you think btc is anonymous you shouldn't even be commenting on it

c. this is an NSA created scam

Yellow_Snow's picture

Lucky for you, I am here to help guide you to another alternate crypto that may better serve your purposes...

VD's picture

yeah, sure, you can shove your dash up ur ass. bc the NSA isn't monitoring it all. idiot.

Yellow_Snow's picture

Sir, I would rec'd the Shitcoin for you, or possibly the Fuck Coin depending on your price range. 

Both good for you...

VD's picture

you already have those coins and i dont fuk wit crypto; tell ur moms which coins to get when she calls you out of her basement.

Kefeer's picture

Isn't that exactly how the DOD "lost" over 8 trillion since September 10, 2001?  When RUmsfeld made the announcement of the 2.1 trillion missing, then 9/11 came as a distraction and during Obama another 6.5 trillion was announced as missing.  It is not missing; just given to a "few of our friends".  Sacks of crap they rrr - I tells ya.

Yellow_Snow's picture

I guess in your world of paranoid delusions, that's all they would be good for...

Clock Crasher's picture

Call off the debt based global monetary collapse to end human civilization.

Bitcoin has arrived.

Let them eat Teslas.

VD's picture

its almost like a crypt0-commie commie swan song.

HRH Feant2's picture

Jeez this former gamer livestreams on Twitch? I actually know about Twitch. The thing that pissed me off was being in a group and someone was live streaming, including the chat box and live voice chat. I didn't know until later. It is one thing to live stream when everyone knows but it is rude to livestream and not tell the other players in the group! I used to play with douches like this. Scary.

VD's picture

from videogame "coins" to crypto "coins". the idiocy is boundless.

copperthumb's picture

wtf? this is just a fucking eToro add......

WTFUD's picture

Shush, here's a monkey to keep stumm!

Chhelo's picture

I still think the Global Cabal will find a way to seize all these assets at will based on tax avoidance. Just a matter of time.

gigadeath's picture

If you cant hold it you dont own it. Molon labe.

VD's picture

butt-coinerz think they can defend themselves virtually too. sad af.

gigadeath's picture

If you cant hold it you dont own it. Molon labe.

Chhelo's picture

I still think the Global Cabal will find a way to seize all these assets at will based on tax avoidance. Just a matter of time.

illuminatus's picture

No doubt they will keep stealing til we put a stop to it.

illuminatus's picture

No doubt they will keep stealing til we put a stop to it.

Kefeer's picture

Or run out of money and become full blown slaves.