Crypto to disrupt brokerage industry, predicts Zerodha founder Nithin Kamath
Zerodha brokerage firm founder and CEO Nithin Kamath said the next big disruption in the brokerage industry is unlikely to come from another brokerage but from cryptocurrency. He added that there is not much to disrupt foreign exchange trading, both on prices and commodities.
Zerodha itself is a brokerage firm that has disrupted the brokerage industry with its discount fee model. The company name Zerodha is a combination of the English word “zero” and the Sanskrit word for barrier, “rodha”. The name signifies the goal of the company which seeks to break down all barriers that traders and investors face when it comes to cost, support, and technology.
Kamath, however, believes that there is not much to disrupt the brokerage industry and said, “In the brokerage or exchange business, both in terms of price and product, there is not much remains to be disturbed. Unless, of course, someone finds a way to pay people for the trade (brokerage is not allowed by regulation) or a way to help all clients make money (very difficult ), ”He explained in a series of tweets.
Brokers and exchanges depend on a small group of active traders, around 1 million, for their income, Kamath said, adding that if they start trading anything else they will disrupt everything. He said active traders also provide liquidity, reduce costs and impact risks, and contribute to better price recovery.
As traders want high leverage and volatility as well as markets open for longer, cryptocurrencies outperform stocks on these aspects, Kamath explained. “Of course, crypto trading is much riskier and there is no fundamental information for price movements. But greed usually takes over most people over time,” he said. he declares.
Kamath also gave the example of the United States where crypto disrupted brokers and exchanges. “Coinbase’s AUM is $ 180 billion, and Robinhood Crypto’s crypto AUM is around $ 11.5 billion. Many incumbents were unable to respond quickly, fearing a return to regulation and most of them missed the bus, ”he said.
India is also in a similar situation to the United States a few years ago, although crypto is still small in the country. “Regulatory fear does not allow regulated platforms to offer Crypto. Ultimately, if the regulatory status quo continues, traders can walk away and disrupt the brokerage industry, ”he said.
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