Five years ago, if you had suggested there would be over 4,000 new CFDs based on footballers from the major European leagues, most people would have just laughed. In 2022 the reality is that traders are seeking out these new alt-assets valuing the integrity of the real players performance data over traditional and boring products.
The ability to put a tradable price on an individual, from a football star through to a celebrity has been made possible because of advances in data analytics. In the online world, most people have a defined data footprint. For sports stars, the famous and the followed, their data footprint is so large it can be evaluated in real-time, giving a value that goes up and down depending on their success or failings.
In the past creating a price on an asset was dependent on the underlying value of the asset with, for example, currencies being linked to gold reserves. This approach changed many years ago with the deregulation of FX trading and the development of derivative-based products, including cryptocurrencies.
The markets are very comfortable with this approach shown by the global CFD market, which is now worth over US$4.5 trillion, but some traders are now starting to question the lack of transparency behind the price discovery of some assets. Whether this is the twitter led corrections to Tesla share price, influences of whales on Bitcoin, or the volatility of emerging market currencies, there are concerns about unpredictable market moves.
Traders can look at fundamentals, technical analysis, or even develop their own algo trading systems but non-data-led price movements, which they have no visibility, are becoming the primary cause of stop-outs and margin calls.
The new generation of alt-assets, like the AllStars Trader football player indices, are based on pure data analysis. They reflect the underlying trading demand, but the price is created by AI, algorithms, and machine learning based on a transparent data set. Admittedly this is a huge data set, accounting for millions of individual data points for each player. This is then benchmarked against peer groups, to give a real measure of value. Goals scored or shots saved. Passes completed or failed. Time on the pitch and transfer values are all part of the data set.
Take Mo Salah from Liverpool as an example. On the 13th of August, the day before his season started his price with AST was $6.92. Fast forward to the present day and due to this incredible season and consistent performances, his price is now $15.85.
Unlike other assets, the price is controlled by a formula. Football fans can use their knowledge and passion to trade the players knowing that there is no Elon Musk about to suddenly move the market up or down, or a pump or dump strategy operating in the background. The formula, alongside the benchmarking, will reflect the actual value increase or decrease of players.
Trading uncorrelated markets like the AllStars football stocks is a smart way of managing risk as investors try and second guess what increasing global inflation and spiraling commodity prices will do to currencies and equities.
Markets are seeing fast and damaging flash crashes as investor sentiment suddenly evaporates, which may not phase large institutional players, but retail investors can be caught with open positions and face losing everything.
The reality, for many of them, is that they know within a couple of points where their favourite football team will finish in its domestic league but would not want to call the direction of the dollar after the next non-farm payroll.
There is an old market adage that says trade what you know, not what you think will make you money. In the current market, this has never been more appropriate. It is essential to have assets in your portfolio that you feel confident in trading for the short and long term.
Alt-assets are accessible, transparent, and also trade at times when many retail investors can give them their full attention. Sitting down to watch the El Clasico, kick-for-kick, or the Manchester derby is far more appealing than making time to follow an ECB press conference.
Football stocks gain volatility and see spikes in trading when matches are happening which tends to be in the evenings or at weekends, perfect timing for dedicated personal portfolio traders, who have other jobs and commitments. That said, with the product being a CFD this enables traders to buy/sell positions outside of the live matches. They also have the ability to hold or exit their own positions whenever they feel ready to.
So, as global markets develop, traders are putting their faith in assets where they can see and understand the pricing. They know that on the day the price of the players they back will be dependent on performance, but they can see the relevant factors and how these impact the performance. They may not get the trade right but can see the integrity of the data behind the price moves.
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