The crypto ecosystem is diverse and combines very different types of investors. A look at cryptocurrencies through the psychological lens.
There are roughly four types of people who buy cryptocurrency. The first is the genus Hodler. These are people who have a deep understanding of the underlying blockchain technology and are forever loyal to their coins. Hodler is there for the long term — be it to the moon or to the bottom of the valley.
The second type of people who buy cryptocurrencies is retail investors. These are the people who tend to be more trending and stumble into the crypto market with short term investment strategies. When cryptocurrencies like Bitcoin rise, they quickly jump on the bandwagon. But if the expected profits fail to materialize and the market consolidates, they exit just as quickly and liquidate their assets.
The third type of people who buy cryptocurrency is institutional investors. These can be hedge funds, investment firms and banks, or public figures such as Twitter CEO Jack Dorsey. The reason Dorsey is included on this list is that he is unlikely to personally call Bitcoin exchanges like Coinbase or Binance and buy cryptocurrency through them. He is much more likely to buy through an OTC counter with an intermediary such as a financial advisor. These people get on and off the train according to their needs and their wallet.
The fourth type of people who buy cryptocurrency is criminals. Unfortunately, in the eyes of many people, cryptocurrency, and especially Bitcoin, are linked to illegal activity. While criminals use Bitcoin for their activities (especially hackers), they tend to turn to privacy coins like Monero, which better protect their privacy. They also make up an ever-smaller percentage of crypto users as more and more people hold digital currencies overall.
The crypto market never sleeps and that has a similar impact on people who actively trade cryptocurrency. Investors can only protect themselves from the highly volatile price events with stop-loss and other useful tools that can be found on most crypto exchange platforms.
Then comes the problem of crypto custody. While buying, trading, and storing cryptocurrency is easier than ever, it is still far from being a process that can be quickly learned by an inexperienced person. Even for experienced cryptocurrency users, the idea that a single mistake in a wallet address could result in the loss of the coins being held can be very scary.
People who own cryptocurrency are all waiting for the day when crypto will finally become a common concept. The reality is that this will not happen until a healthy balance is struck between regulation and freedom, either internally within the cryptocurrency community or with government support. In addition, cryptocurrencies must be better explained and marketed for outside interested parties.
Fortunately, these issues are gradually resolved over time. How quickly these processes take place is ultimately up to us. Trench warfare between supporters of different projects and coins stands in the way of the great goal of a global crypto adaptation. Rather, the community should network and jointly announce the happy crypto message to the world.
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Disclaimer: These lines are not a substitute for investment advice, investments in the crypto market are made at your own risk. Invest only as much as you are willing to lose. I get commissions for purchases made through links in this post.