PrimeXBT is by far the largest “crypto only” broker and has relied on crypto currencies from the beginning. This means that you can only deposit crypto currencies there and only trade with crypto assets. You wont find any gold, the Euro or Paypal as payment method. But thanks to this focused strategy it was possible to gather the trust of the trading crypto crowd. And today there is basically no comparable broker in addition.
How does PrimeXBT Covesting work?
Only recently, PrimeXBT introduced a copytrading variant that has it all: PrimeXBT Covesting. The principle is simple. You can simply copy selected traders and invest in their strategy. However, the trader and the platform keep a part of the profit for themselves – which is not so little, with sometimes 20% each. This means that if you invest 1 BTC in a good trader and he makes a profit of 1 BTC, you will only get 0.6 BTC back. Depending on the period, this is still a good return. However, this structure is different.
Covesting therefore doesn’t work like a simple copytrading like the eToro Copytrader for example but – as the name suggests – you invest together with a trader. Only that you provide the capital and the trader takes care of everything – in return he gets his share of the profit.
Should one invest in PrimeXBT Covesting?
If you look at the returns of the top traders, then definitely yes:
Unfortunately, it is the case that you cannot always invest because the limit of “followers” has already been reached. So even if a good opportunity presents itself, there is no guarantee that you can actually invest. But let’s assume that you have enough traders available for covesting. Is it then a good choice?
This question is actually not easy to answer and the tendency is definitely to just look at the current ranking. There is someone in 1st place with xxxx% return in 24h, someone in 2nd place with a little less and so on. But how meaningful is that?
The problem with PrimeXBT Covesting is, at least currently in November 2020, that the time periods only go back a few weeks because the platform has not been around that long. So you don’t even have the opportunity to study the long-term performance. Of course, this will happen in the course of time and longer periods are available.
And that is exactly what is absolutely crucial to be able to judge whether an investment is worthwhile. Because in the short term, any trader, no matter how incompetent, can show outstanding performance. And yes, there will always be someone with such a performance. He will be at the top of the 24h or 7 day chart. Until the performance is no longer there and his place is taken by the next one. But if you invest then, there is no guarantee that the performance will remain as good.
This is especially difficult to judge in clear trend markets. Bitcoin, for example, experienced a real rally at the beginning of 2018 and the end of 2020. At this point, it was relatively easy to go long and realize high returns. But what about a trend reversal? How well is the trader prepared for it? And how does he fare in a sideways movement? All questions that should be answered.
If you are in doubt, you should always go for the long-term performance and not be influenced by the top ranking of the last few days. Because this is relatively meaningless. Don’t be blinded by too high returns and analyze properly.
Our recommendation for PrimeXBT Covesting
As good as the concept is and as many good traders are already at PrimeXBT Covesting, the problem is that only really longer-term data must be available to justify an investment. PrimeXBT Covesting, like eToro Copytrader, has the problem that there is a “Survivorship Bias” that also brings up traders who are not performing well. If you always show the top 10 traders, their performance looks astronomical. But that doesn’t take into account the fact that probably 8 of these 10 traders landed there by chance and will make losses again next week. You should always keep this in mind.