Key Takeaways
- Self-awareness is an important concept for anyone involved in cryptocurrency investment.
- Cryptocurrency traders display different tendencies based on their knowledge and when they enter the digital asset market.
- Since a user can have investment strategies moving across several types of crypto investment, it’s important to remain honest with yourself and make the necessary adjustments.
When it comes to any form of investment, self-awareness is a critical concept. Clearly understanding what type of investor you are helps you choose a strategy that aligns with your goals and risk tolerance. This article helps you identify different types of crypto investors to help you make informed decisions.
What Type of Investor are you?
Knowing what type of crypto investor you are is critical as it helps you make better decisions before you click the “buy” button. The industry may still be relatively young, but more and more people are joining it every day, though for some, it’s merely for speculative investment. Over time, a pattern has emerged showing there are common types of crypto investors, each having their own different habits and motivations.
The Beginners
This type of crypto investor is totally new to the digital asset space. They could have just heard about Bitcoin because of an ongoing Bull Run and been attracted. In most cases, they are naïve, often lacking knowledge and experience. Since they’re mostly unable to differentiate between correct information and incorrect information, it’s extremely important for anyone who is just beginning to educate themselves.
Beginners can get very optimistic when they become lucky and make a successful investment. However, they can become very pessimistic when the market turns down. Their feelings toward the crypto space are dependent on the rhythm of the market conditions. Beginners must remain fully aware of the risks associated with this kind of investment and, as a rule of thumb, commit not to follow others blindly but rather do their research and due diligence. Also, consider using a safe and user-friendly platform that follows strict security measures and offers crypto-educational content for beginners.
The “HODLers”
The HODLers is a type of crypto investor with a lot more experience than the beginner but may not be trading cryptocurrencies regularly. Instead, HODLers believe in the long-term potential of their digital assets. Understanding their volatility, they are mentally prepared to weather the storms of the crypto market, including the upward and downward swings, reacting less emotionally to bear and bull runs along the stride. The HODLers’ strategy is a long-term investment, often waiting to cash out during the best market moments.
For HODLers, it doesn’t matter how long they wait; it could take months or even years before they take action on their crypto holdings. The term HODL is mostly used as an abbreviation for Holding On for Dear Life. However, in the crypto space, it is said to have originated in December 2013, apparently from a type by a drunken online user, who said, “I am HODLing.” The user meant he was holding on to his BTC despite the downward trend in the market from November 2013’s all-time high.
The Traders
Among all the types of crypto investors, traders are the most well-read and experienced and follow almost every movement of the cryptocurrency market. Traders keenly follow analysts who make detailed predictions based on numerous financial and mathematical principles. Moreover, they don’t mind acting on the smallest changes in price besides being prepared to take even bigger risks.
While some traders are quick to cash in on the short term and exist as fast as possible, other investors are in it for the long haul. The more experienced traders keep a keen eye and ear on market-related news, such as developments in the regulatory landscape, to predict the bigger picture. However, note that it’s not possible to predict the future completely accurately; instead, professional traders have enough knowledge to maximize the chances that occur in the market on a regular basis.
The Early Adopters
The early adopters refer to the group of people who bought Bitcoin during its earliest days before most others had even heard about it. As early adopters piled up on their crypto holdings, governments, regulators, and other individuals called it a scam and a tool for fraudulent online transactions. While their decisions could have been out of sheer luck, early adopters will start using technologies or products as soon as they enter the market.
In most cases, early adopters stay anonymous since they wouldn’t want to go public as people sitting on millions of Bitcoins. Others may have already chased out and become extremely wealthy as a result. Additionally, some early adopters may be among the biggest crypto influencers or whales whose actions can move BTC prices one way or the other.
The FOMO’ers
The FOMO’ers, or those who “Fear of Missing Out,” are people whose decisions are driven by anxiety for fear that they could miss out on trade opportunities or potential profitable investments. The investors are mostly emotional decision-makers whose main influence is the market hype surrounding market trends or particular cryptocurrencies instead of depending on thorough research or logical analysis. As a result, they buy cryptocurrencies when they are at their peak, lest they miss out on further gains or end up HODLing for far too long, hoping that they will recover their losses.
In most cases, FOMO’ers are vulnerable to social media influence and market trends and could end up making decisions based on rumors. The biggest undoing of this type of crypto investor is a life filled with constant anxiety as the crypto market remains quite volatile. Traders can manage their FOMO by developing and adhering to a risk management strategy besides understanding that there will always be future opportunities to avoid moving their funds at the smallest market movement.
Conclusion
While our guide didn’t cover all the types of crypto investors, you could have realized that you adhere to one or a portion of multiple categories. Once you recognize where your disposition lies, it would help if you learn more about where your tendencies are. Take the time to read more and better understand the workings of cryptocurrency technology and the digital asset market as much as you can. Always remain honest with yourself after making an honest assessment of your preferred strategies so you can make better-informed decisions.
