All Crypto Investors Aren’t The Same: The Crypto Space Is More Diverse Than You May Think
Understanding crypto is only half the battle.. understanding yourself is the other half.
All crypto investors aren’t built the same.
I can see how a new person coming into the crypto space can easily assume that the majority of us are a homogenous group of likeminded individuals, with similar goals and strategies.
This couldn’t be further from the truth though.
While it is true that crypto, as we know it today, started with a relatively small group of geeks, developers and tech savvy individuals, it has since exploded into a vibrant field with more diversity than a liberal arts college in California. No longer is it just the experimental, off-the-wall ideas that only certain circles were privy to — everyone and their grandparents are getting in on the fun now.
With this surge of people from vastly different backgrounds and economic standings coming into the space all at once, though, the mad rush often leads to a lot of confusion. Many aren’t sure what (or even how) to invest, so they end up turning to others for examples as to how they should go about making their investments in this new technology.
This can lead to these new people starting to adopt different ideas and strategies from the people that they follow, moving forward with them solely because they worked for those individuals.
..we should definitely stop doing that.
Adopting someone else’s investing ideas, ideologies and strategies without first assessing for yourself if that works for you (a.k.a. DYOR) can lead to some major problems down the road (in general, not just in crypto).
In this article, I’ll be highlighting some of the different types of crypto investors that exist today and the different approaches that drive their investing decisions.
Casual/Rookie Investors
This makes up one of the largest portions of people in the crypto space. The majority of the people that recently came into the space in the last two years fall into this category. These are the ones that don’t particularly care that much about the underlying technology and are just looking for another decent avenue to invest their hard earned money. In most cases, they start with bitcoin and 2–4 other coins that are prominent on popular exchanges (like the ones advertised the most on Coinbase).
The way that they enter the space is just as diverse as the group itself. With this wave of crypto-mania that we find ourselves currently drowning in, there are numerous avenues where people that aren’t yet acquainted with crypto can find exposure. Maybe their barber was talking about how much money he made off of bitcoin last month. Maybe their aunt was telling them about a crypto investing group that she recently joined that’s been giving her great returns. Maybe they just saw an ad while scrolling through IG/twitter and curiosity finally got the better of them. Or there was a Bloomberg news report on crypto spikes. Or there was a crypto commercial while they watched YouTube. You get my point.
It doesn’t matter what their entrance point was — something got them interested and they decided to pursue it.
This group is also the most prone to succumbing to FOMO (fear of missing out). Since they often feel like they are late to the party, they tend to rush into certain investment decisions based on certain headlines that come up in the news or updates that they hear from people that they deem to be reputable sources.
While we’re on the topic of reputable sources — this group also has a tendency of latching onto some of the first people that they find in the space that appear to be relatively knowledgeable, and they treat their word almost as law. They closely watch/follow the investments that these guides discuss with them and make buying/selling decisions based on their stances/guidance. I know.. this may seem harmless — but since this is one of the largest groups in the crypto space today, these herd-like investing decisions have the potential to collectively move the market significantly in either direction.
All of this aside though, this group is indirectly responsible for a lot of the innovation that we see in the space in terms of the mass adoption. With these casual investors just looking for simpler, more efficient ways to interact with crypto, the space is forced to adapt and innovate to meet those needs.
Bitcoiners
This is a group of people that believe bitcoin to be the best investment for their money, but they never rule out the possibility of making investments in other crypto projects as well.
Fun fact: since starting my journey, I’ve always identified as a bitcoiner, and you’ll often see that reflected in my writing/content.
The reasoning behind their preference of bitcoin varies from person to person, but whatever their rationale may be, they have a mutual understanding that bitcoin, to them, is (and will probably always be) the best crypto.
As far as their investing style, you will often find these people keeping the majority of their crypto holding in bitcoin with a portion of their portfolio dedicated to investing/trading in a few other crypto projects that they deem to have potential. And what do they do with the profits that they gain from any of the other crypto projects?
More than likely, they cash out or slide them right back into their bitcoin stash.
Bitcoin Maximalists/Purists
This is the most extreme classification of bitcoiner. These investors see one thing, and one thing only — bitcoin.
They don’t want to hear anything about any project that isn’t directly tied to bitcoin. In a sense, they almost look down on other projects as inferior wastes of time that consume funding and resources that would be better spent improving/fortifying the bitcoin network.
The reasoning for their unwavering support of the bitcoin network normally stems from two places:
- their understanding of the bitcoin network and it’s advantages in today’s society
- their general disdain for the current financial system and infrastructure that we use globally
As far as their investing style — I mean.. you can guess right?
Bitcoin, bitcoin.. and then some more bitcoin.
Young Millennials/Gen Z
This group of investors is unique — they grew up with the technology that has progressively become today’s standard. For them, these technological advances are just the natural progression of society — they don’t see things like crypto as a risky gamble.. they see them as our inevitable future.
Being at the very tail end of the millennial generation, it’s easier for me to relate to many of Gen Z’s ideologies — two of these being the openness to change and the embrace of technology that permeates all facets of our lives. When you look at many of the people leading the charge into the crypto space today, you’ll find that they are either millennials or Gen Z’ers.
While there is no specific reasoning behind their investing decisions, the research that goes into these projects comes more naturally to this group because they are already digital natives (they’re accustomed to being able to do almost anything with a computer/cell phone and an internet connection). Also, since they grew up during the growth of the Digital Age and are more familiar with info sources like Google and Wikipedia than traditional news sources, they are less likely to fall for many of the scams that their older counterparts continuously succumb to.
Their investing style — if boomers and the government don’t like it, then it must be good. I’m kidding — but I’m also kinda serious.
Hodlers
Some people say that HODL (sounds like “yodel”, but with an “h”) is an acronym for “Hold On for Dear Life”, but realistically, the phrase is just a running joke in the crypto community that came from a typo in a drunken post on a bitcoin forum. The person that made the post was just emphasizing the fact that they refused to sell their bitcoin, regardless of the movement of the market prices—they planned on holding/“hodling” onto their bitcoin forever.
While this wasn’t the creation of the ideology, this was the creation of a blanket term for these types of investors. This group is also highly diverse, including people from all walks of life — rich and poor, veteran and rookie, old and young.. this group is more defined by their faith in crypto than anything else.
This almost fanatical level of conviction allows them to ride through the drastic price changes that would cause any other investor to waver. They see crypto as an inevitable future for us, so while many people focus on the volatility of the market today, hodlers have a long-term view that only sees growth and profit down the road.
Their investing strategy — buy it over time, hodl it, then just wait.
Day Traders
This group normally consists of two types of people:
- ones that started in traditional markets and moved into crypto, bringing with them the traditional tools and practices of those markets
- ones that started in the crypto space and learned to use the traditional stock market tools and practices here
Charts, algorithms and bots are a standard part of their day-to-day lives. Their main goal is to take advantage of the price movements that occur in the market in order to make a profit.
While this doesn’t apply to all of them, there are some malicious day traders that participate in shady practices for the sake of turning a quick profit. One particular practice is the notorious “pump and dump”. Here’s a simple layout of how it works:
- they invest a significant sum of money into a project while the price is low, giving it a slight boost in value (on paper)
- they use persuasive marketing techniques to advertise that boost as “organic growth and potential” to rush others into investing in the project
- the surge of incoming money from new investors causes the price of the project to shoot up
- the trader then sells their original position in the project for a significant profit, leaving everyone else with the lower prices on these often valueless tokens/coins
Their investing strategy is normally straightforward — using tools like fundamental and technical analysis, they figure out which projects seem like they could be profitable in the short- and long-term, then make trades based on their predictions.
Whales
This term refers to the super wealthy people that have access to millions/billions/trillions of dollars that they can throw into different investments without blinking an eye. The term “whale” comes from the size of their pockets/wallets — any demographic that has enough money to single-handedly move an entire market falls into this category.
In most cases, the whales tend to be one of two people:
- institutional investors that made their money in traditional markets and are now looking to diversify their portfolio in the crypto space
- veteran crypto investors that were in the space from it’s inception/early days and are now part of the 1% of crypto investors
Many of them were initially hesitant about investing in the crypto space, and rightfully so — the volatility of the crypto space compared to the traditional space made the investment seem way too risky. As of recently though, as more and more big names in the world of finance and investing slowly make their way into the space, whales are becoming more comfortable with these investments.
Their investing strategy — figure out which investments are the safest/most stable for their money, then throw a ridiculous amount of money at it.
These are just a few of the different types of investors that you will find today in the crypto space. No two are exactly alike, and their ideologies and approaches to the crypto space can be as diverse as they are.
The point of all of this was to highlight this point — no one else in the crypto space is like you. They don’t have the same history, financial situation, education, resources, information, interests or risk tolerance as you.
So why would you choose to blindly invest just like someone else does?
While there is nothing wrong with looking to another investor for guidance or help in getting started, ultimately, the final decisions that you make should be based a combination of two things: the research that you’ve done and your assessment of your unique situation.
Figure out what works best for you. For example, I identify as a bitcoiner and hodler, but I’ve dabbled in trading as well. You may be a whale that, after doing your research, is convinced that bitcoin is the future, so you become a maximalist/purist and invest your money there. You could be a broke millennial that truly believes in the ethos behind crypto and chooses to dollar cost average into a projects that you believe in and just hodl it.
Whatever you find out about yourself, stay true to that, and allow it to be your compass to guide you through this vast wilderness of crypto investing.
*I am not a financial/investment advisor, this article is not financial/investment advice and any information shared here should be personally researched prior to making any financial/investment decisions.*
