EXCLUSIVE: Retail Investors Are Taking On More Risk And Finding Success — Is Crypto Acting As A 'Gateway Trade?'

The retail investing landscape is changing as individuals are increasingly looking to take on more risk. Yoni Assia, co-founder and CEO of investing platform eToro, believes crypto is playing a big role in the evolution of the retail investor.

What To Know: Tuesday at the Benzinga Fintech Deal Day & Awards, Assia made the case that risk appetite is the biggest difference between older generations and retail investors today.

Older generations focused on dividend yields, the Baby Boomers started focusing on price-to-earnings multiples, Gen X began focusing more on growth, Millennials took it a step further and focused on tech stocks and now Gen Z is more focused on crypto and things like Dogecoin DOGE/USD becoming the currency of Mars, he said.

EToro started the year with just 2% of its customers trading crypto and now has more than 90% of customers involved with crypto in some capacity across its platform, Assia said.

Crypto is driving that bigger tolerance for risk due to its becoming a “generational asset class” and a “gateway trade” for a lot of individual investors. Many retail investors come to the platform to trade Bitcoin BTC/USD, for example, and then end up exploring other investment options, he said.

Many crypto investors have a higher appetite for risk and as crypto investors cross into traditional markets, retail traders are starting to make a bigger splash. The surge in retail investors in recent years has changed market dynamics, Assia explained.

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The way investors get information has also changed. In the past, a lot of individuals would read investment reports and put a lot of time into researching a potential investment, but now traders are getting information very quickly from various news outlets and from other individual investors on social media platforms like Reddit and X. If they are reading research reports, they are likely using ChatGPT or another LLM to pull the key information, he added.

When talking about retail investors versus individual investors, you often hear the terms “dumb money” and “smart money,” but “I think that’s completely wrong,” Assia said: “We see it on our platform.”

eToro allows investors to see what other investors on the platform are doing and even copy their trades. Assia told the crowd at the Benzinga conference that there are 3,200 investors on the platform that are being copied by other traders. Most of those investors consistently generate double-digit returns and often outpace the S&P 500.

“These are like hedge-fund level returns of our top retail investors on the platform. I think this narrative is coming from the people who want to manage the retail’s money and don’t want them to manage their own money,” he said.

The playing field is already in the process of being leveled and new AI tools are only going to help accelerate retail’s ability to see consistent success in the markets, Assia said.

The Benzinga Fintech Deal Day & Awards panel was called “The Evolution of the Retail Investor” and was hosted by CoinDesk’s Benjamin Schiller.

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