Social media platforms are abundant, and so are their user bases. These platforms grow via network effect and have become an economy and ecosystem all on their own. Influencers build massive brands with millions of followers which they use to monetize.

Technology is booming in other areas also. For example, the cryptocurrency industry has increased significantly in popularity and interest since the pandemic first began and pushed digital currencies into the forefront of finance and politics.

The two technologies existing on the internet have created a unique intersection of social media and finance and have led to the emergence of the likes of the WallStreetBets subreddit, meme stock and coin culture, and much more. It has also led investors down a slippery slope where they follow their influencer idols blindly off a cliff, incurring personal financial losses that cannot ever be fully recovered.

Fortunately, a better way exists, and it takes certain aspects of the social media landscape such as followers but combines it with crypto, full transparency, and a massive peer-to-peer trading community.

What Is Social Trading?

Social trading is defined as "taking actions or opening and closing positions based on the signals, charts, or actions taken by another trader, typically an influencer or crypto analyst in some capacity." Simply put, those new to markets, wanting to learn, or eager to win will follow the lead of those they perceive to be in a better position than them in terms of wealth, skill, or both.

Because social media is massive, there are literally hundreds of these influencers out there, some with the best intentions, others with ulterior motives. Behind each influencer is a larger-than-life following they tend to have wrapped around their fingers. Marketers leverage their influence to sell products and reach consumers. Their impact is undeniable. When they speak, someone listens.

But as time has proven, again and again, these people are not always what their image presents, and often have ulterior motives or show a very different side when the cameras are not on so to speak. For example, well-known traders have been caught red-handed doctoring PnL screenshots with photoshop and then sharing them with their audience. Others outright lie about their success. Very few actually care about the audience they are speaking to. They only seek to make money off their audience and don't have any reason to consider anyone else's success.

Social Media Influencers And Potential Danger

Even extremely large public influencers with plenty of reason to trust them, still do not fully understand the weight of their comments, which can even have an impact on markets. In the past, a negative remark from Kylie Jenner caused Snapchat shares to plummet $1.5 billion, for example.

Cristiano Ronaldo also caused Coca-Cola shares to tumble by more than $4 billion after snubbing the soft drink at a press event for water. But none of these situations compare to the damage Elon Musk did to the entire cryptocurrency industry when it was trading at all-time highs.

After a series of negative tweets and an appearance on Saturday Night Live, Elon Musk made a mockery out of crypto and brought on a string of Bitcoin energy FUD. His company went from buying Bitcoin to denouncing it for not being green enough. In the end, it caused a mass exodus of miners from China, which has resulted in a greener Bitcoin network.

But this didn't happen before Bitcoin dropped by more than 50% and more than $1 trillion was wiped out from cryptocurrencies collectively.

Who To Follow? Consider Copy Trading Instead

But what is a newcomer to do? If you can't believe your influencer idols, nor can you believe icons of the business world, then what? Due diligence and learning the ropes is one way, but early on new investors and traders especially tend to lose more money than they make. And let's face it, everyone is impatient these days. This is why copy trading is picking up in popularity.

Copy-trading combines many of the best aspects of social trading, such as following someone else's lead but also ties in certain attributes of the cryptocurrency industry such as transparency and staking. For example, with Covesting copy trading, anyone can become a follower and begin following any of the growing lists of hundreds of strategy managers who regularly show success on the Covesting leaderboards.

Rather than following someone blindly, followers get a wealth of risk and success metrics as well as verifiable data to back up any PnL screenshots shared. In fact, all strategy managers are ranked by total profits, which is visible at any given point for all followers. Followers will want to follow those with the most profits total, but who also fit their risk appetite and other parameters.

Followers can also manage these positions with stop loss and take profit orders, which will close out the following and realize any profits or losses.

What Covesting Copy Trading Has To Offer

The real game-changer for the Covesting copy trading platform is the fact that strategy managers must have skin in the game, which gives them plenty of incentive to stay engaged and ensure their followers are on the right side of the trade. Strategy managers earn a portion of the success fees generated by their follower's capital, which helps to grow their personal capital also. Followers also get a cut of these success fees for each successfully closed trade they copy.

Both followers and strategy managers can also improve the experience further along with total profitability by staking COV tokens. COV is the native utility token to the Covesting ecosystem. By staking COV tokens, users unlock trading fee discounts, increased profit shares, and much more.

With COV tokens staked and the right follower chosen, copy trading on Covesting is an infinitely more reliable and trustworthy solution compared to following traders and analysts on social media and hoping they have the skills they say they do. The next time they tweet or share a chart, tell them to prove their skills and become a strategy manager on Covesting so they can put their skills on display and make even more money than before.