2021-09-17
Five Types of Crypto Investors
Cryptocurrencies has become more mainstream as more people are jumping into the market in order to not missed out. There are several types of crypto investors and so which one are you?
The beginners are the baby of the crypto space. Most beginner crypto investors jump onto the bandwagon with the mindset of joining the craze. The news on blockchains, cryptocurrencies, and people obtaining life-changing money through cryptocurrency has sparked the interest of many.
Plenty of beginner investors start with a small amount trying to get into the market. Some beginners stay when they feel that their investments are profitable, while some walk away when they experience losses. On the other hand, some of them enter the market and bought famous cryptocurrencies such as Bitcoin and Ethereum.
Hodlers are the name for someone who hodl on any coin or token. The word 'HODL' is an acronym standing for "hold on for dear life". A Hodler holds to the principle of purchasing and hopes that the coin’s price will increase in the future. The most famous coins that are usually being hodl are Bitcoin and Ethereum.
There are a few exchanges and other platforms that offer staking, farming, and pooling services for hodlers to grow their assets. Staking most likely offers a lower annual yield compared to farming and pooling. For example, on Pancake Swap investors can stake their $CAKE token for 86% Annual Percentage Yield (APY) while CheeseSwap offers up to 3,103.65% APY on their Kiwi Farm.
The gigantic APY is usually offered by new tokens while famous coins like Bitcoin or Ethereum mostly have APY from 1% till 10%. Cakedefi.com offers 6% APY on Bitcoin, while Kraken.com offers 0.25% APY only of the same cryptocurrency. There are huge differences in staking interest, thus the responsibility lies on the investors to make their own wise decision. Farming, staking, and pooling have the same concept of putting your savings in a fixed deposit like in traditional bank to receive dividends.
Traders mostly consist of experienced crypto investors who understand the nature, and the technology behind each coin. There are two types of traders; one is implementing an arbitrage concept while the other implements the capital gains concept. Investors who use capital gain strategies take profit by "buy low, sell high" concept on the same exchange, while traders who use arbitrage strategies buy at low in Exchange A and sell at high on different exchange.
Early adopters consist of crypto investors who are tech-savvy and understand the potential that lies behind each project even before it goes ‘live’. Most early adopters purchase coins during private sale periods at a discounted price.
This usually happened during the launchpad period or during the crowdfunding. Some early adopters invest directly by being the angel investor of certain projects to oversee the progress. Imagine buying Solana (SOL) during their Initial Coin Offering (ICO) last March 2020 for $ 0.220. Today, Solana is currently trading at $ 183. Their early adopter investors are making 83,081% profit from solely from that single investment.
Following trends is good only if it is conducted in a correct way. When Elon Musk tweets his famous tweet “Dogecoin is money”, trend followers decided to follow his words. That tweet had caused DogeCoin to experienced an increase of 11,000%. Even with $ 10,000 investment into Dogecoin before the price increase can make you a millionaire.
However, some investors follow trends in a negative way where they are afraid of missing out. Thus, they invest in coins when the price is high and panic when the price suddenly falls. This has happened to many Bitcoin investors where they buy when the price peaked at $ 65,000 and sell when it dropped last May.
Although investing in cryptocurrencies seems very attractive, please do understand that it is highly volatile. Therefore, please do your own research before you begin investing.
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