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Digital currencies can be confusing and overwhelming. It does not come as a surprise that almost 90% of the digital tokens that are bought are never traded or re-invested.
This is a problem for exchanges that make revenue from trade activity.
The stock exchange, a more mature market, has tackled the same issue by offering the S&P 500 to the individuals that are not interested in active trading, but do want to invest in the top stocks. Exchanges of digital currencies can also increase their revenue if they would offer index solutions, similar to the S&P 500.
The problem is, offering index-based portfolios requires many resources and a complex infrastructure.
DemaTrading.ai enables the exchanges of digital currencies to start offering these index-based portfolios to their end users. For the exchanges, the trade activity is multiplied by a factor x40-x60 on a yearly basis, increasing their revenue. For end users, this means smarter investments and improved risk profile.
Product and Traction
Indexes are intended to give the end users a well spread investment in the market. This increases the trade activity, which generates more revenue for the exchange compared to a traditional investment. Additionally, the indexes make investing accessible for end users without needing to be a domain expert.
The indexes are tailored to the requirements of the exchange. The following variants are implementations of our solution.
- Top market index
We provide an index of the top cryptocurrencies according to the requirements of our partner. This spreads risk, reduces exposure and increases return on investments over-time.
- Category specific indices
Leverage innovation by investing in specific industries such as DeFi, Metaverse, Proof-Of-Stake and Infrastructure.
- Dynamic configurations
Add stop losses or take profits, set custom weightings, adjust trading frequencies, optimize with machine learning based on risk, profit and trading volume requirements and more.
We charge a minimum of 0.1% management fee per month to the exchanges in combination with a trading fee that decreases as more funds are invested. There are no fixed fees or licensing fees. We cover all costs for the partnership including infrastructure, hosting and maintenance, making it a hands-off solution.
Everything in our partnership is set up to prevent conflict of interest. That is the reason we have an aligned fee model with a revenue split.
The global market for digital currencies reached €950 billion in 2021. 90% of it is never traded or reinvested, but could have been invested in indexes. Based on our forecasts and current trajectory we expect to capture approximately 1,2% of these passive investments by 2028, which translates to roughly €10 billion invested in our index-based portfolios.
The proof that our solution works
Since 2022 we have partnered up with 5 big players, including BOTS and Bitvavo.
So far we have rolled out indexes (top 5, top 10, top 20, etc) with more than 18k people who have invested over 25 million euros in our portfolio solutions through the exchanges. This has generated an additional 250 million euros of trade activity for our partners.
How do we compare with competitors?
We position our indexes along 2×2 dimensions: Custom vs Standard indexes and On vs Off-platform investment.
At the current landscape our competitors provide index solutions off-platform. In order to invest in them, the end user needs to first create an account at the competitor. This limits the ease of use as end users need to transfer funds from their preferred exchange to the competitor. We provide the index-based portfolios on-platform, meaning that the end users can invest directly on their preferred crypto exchange.
Roadmap + funding milestones
After gaining traction, we aim to acquire three to five new partners in order to further validate our market fit. We will do that while optimizing the product and while testing for channel-product fit.
To get to three to five more partners we plan to hire talent to establish product-channel fit, optimize the product, and translate the value into a marketing strategy. We are further strengthening the trust with the brand by rolling out case studies and complementary resources. Furthermore, we will start preparing for the scale-up phase by getting certifications and ensuring a seamless user experience.