Nithin Kamath Tweet: The rapid expansion of speculative trading avenues in the US since the COVID-19 pandemic has fundamentally changed financial markets, bringing cryptocurrencies, prediction markets and several new asset classes into the mainstream, according to Zerodha co-founder and CEO Nithin Kamath.
In a post on X, Kamath reflected on how the market landscape has evolved, from the emergence of zero-day options before the pandemic to the growth of crypto derivatives, stablecoins, non-fungible tokens (NFTs), decentralised finance (DeFi) and prediction markets.
Kamath argued that the pace of change in US financial markets since the pandemic had been particularly striking, with several products that were once considered niche now attracting mainstream participation.
“The rate at which the US markets have changed (mutated) since COVID is nuts. Before COVID, the last major “innovation”, if you want to call it that, was 0-day options. But since then, you’ve had crypto trading, and with that, stablecoins, derivatives, NFTs, and DeFi, not to forget shitcoins,” said Zerodha CEO Nithin Kamath said in a post on X.
Crypto and prediction markets
He noted that cryptocurrency had moved beyond its earlier image as a fringe asset class, with trading increasingly supported by established financial products and regulatory acceptance. Crypto futures and exchange-traded funds (ETFs) have helped bring digital assets closer to traditional financial markets, while the broader ecosystem has expanded to include stablecoins, derivatives, NFTs and DeFi.
Prediction markets have followed a similar trajectory. Although they are often compared with betting and gambling because users speculate on the outcomes of future events, Kamath said their growing popularity had made them an increasingly important part of the financial ecosystem. He specifically pointed to Robinhood, the US stockbroking platform, as an example of a traditional brokerage benefiting from the rise of prediction markets.
“For all the jokes and memes, crypto is fully mainstream now, with almost full regulatory blessing, with futures, ETFs, etc. Then you have prediction markets,” he noted.
He added that while one can call the prediction markets betting or gambling, they too have become mainstream, so much so that stockbrokers like Robinhood now get a big chunk of their revenue from them.
Kamath sees financial literacy benefit but warns of risks
Despite concerns about the speculative nature of these products, Kamath believes their popularity has had an unintended positive impact on market participation. He argued that the excitement around high-risk assets and the fear of missing out (FOMO) could encourage people who might otherwise have remained outside financial markets to start exploring investing.
“But putting my thinking hat on, the one good side effect of all that speculative craziness is that it gets people into the market. Nothing expands the markets like greed, FOMO, and craziness.”
Kamath also highlighted Dogecoin, a cryptocurrency that gained popularity through internet memes and online communities, as an example of how unconventional assets could introduce people to financial markets. He suggested that the attention around the cryptocurrency had encouraged more people to learn about digital assets and investing than conventional financial education efforts.
“Nobody ever read Morgan Housel and started investing. Dogecoin, on the other hand, has done more for financial literacy than anything else.”
However, the Zerodha CEO warned that on the flip side, such easy access to speculation is bad for people and society. While easy access to speculative products can draw new investors into the market, it can also expose individuals and society to the risks of excessive gambling-like behaviour and financial losses.
The concerns come amid volatility in the cryptocurrency market. Bitcoin, the world’s largest cryptocurrency by market capitalisation, fell more than 2% to $73,708, its lowest level since August, according to the reference material. Ether declined around 5% to $2,223, also its weakest level since August. The declines came as investors worried that a Democratic-controlled US Congress could pursue tighter regulation of digital assets.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
