Cryptocurrency has been trading in extreme greed, which can be attributed to accessibility. Previously, digital assets were available on very few online platforms, whereas now, more exchanges than ever support the buying and selling of tokens. ETFs (exchange-traded funds) offer investors a way to diversify their portfolios without the risks of holding funds. It’s possible to start with smaller amounts so BTC is accessible to a broader audience.
The cryptocurrency has a limited supply of 21 million tokens, which translates into the fact that it can’t experience inflation, but what really appeals to investors is the price potential. The Bitcoin price chart shows that it has one of the most favorable periods in its history, reaching a record-breaking $94,000 post-election and remaining close to that level until recently. BTC is no longer trading in a bear market, so it’s a good investment today.
For beginners, the world of cryptocurrency can be confusing, overwhelming even. One of the most critical aspects of trading is understanding what type of trader you are to make better investment decisions. In what follows, we’ll explore the various types of crypto traders and their strategies to expand your knowledge so you can maximize profits and minimize losses.
HODLer
HODL (hold on for dear life) comes down to buying and holding cryptocurrency indefinitely. A HODLer, is, consequently, an individual who holds onto their digital assets for a long period of time, irrespective of market volatility, refusing to sell their coins. If you believe in and are sure about your choice, whether it’s BTC or an alternative coin, buy and hold without taking the price into consideration. Keeping your cryptocurrency in your portfolio longer is more cost-effective compared to regular buying and selling, not to mention that you save on taxes. There’s no immediate gain or loss.
Once you’ve completed the purchase, find a place to store your Bitcoin; otherwise, it will go missing. No matter if you’re interested in the highest levels of security or prioritize ease of access, you need a crypto wallet, which can be a user-friendly app or a more complex security solution. There are different types of cold storage, but the most common are hardware wallets. The keys are stored in a thumb drive device that you should connect to your computer only when you want to send or spend funds. Hot wallets can be safe if used correctly. Still, they can be compromised if your device becomes infected with a keylogger.
Sentiment Trader
It’s no secret that the cryptocurrency market is driven by emotion – namely, fear, greed, hope, and euphoria. The problem with emotional investing is that it leads you to make suboptimal decisions, meaning you’re overconfident when the market is rising and panic when all goes down. Some traders use sentiment analysis to get an idea of what to buy and sell, essentially reading signals about how other investors feel about the cryptocurrency market. Put simply, they combine aspects of technical and fundamental analysis to identify and take advantage of market sentiment.
You can try to gauge the sentiment of the cryptocurrency market by using computer programs to analyze the vast quantities of data and communications. Different trading approaches can be leveraged, including but not limited to swing trading that attempts to exploit big price movements while avoiding idle times. Equally, you can resort to contrarian investing, where you use indicators of excessive positive or negative sentiment to identify bullish divergence. Social media platforms like Reddit or X (formerly, Twitter) are rich in information, so be sure to track mentions, hashtags, and discussions related to Bitcoin or other tokens.
Diversified Investor
Instead of putting your hopes in price gain, you should better diversify your portfolio to even out market fluctuations. Without a doubt, there’s no guarantee it will strengthen your overall returns or outperform a non-diversified portfolio, but it’s far better than living with regrets. You can enjoy the stability of coins like Bitcoin (or Ethereum) and the remarkable potential of mid- and low-cap coins. You can diversify across ten or more assets. Having an 80/20 blend of BTC and cryptocurrencies like Tezos, Monero, VeChain, and Dogeverse should help you make sizable profits from any sudden price movement.
But what if all the coins in the cryptocurrency portfolio crash at the same time? The truth is that the possibility of incurring devastating losses is extremely low, so there’s nothing to worry about. Even if all the diversified assets collapse, the profit you won’t make from trading activities isn’t as high as that of investing exclusively in Bitcoin. You can concentrate on the use cases of tokens and gauge the potential of such applications, so don’t hesitate to invest in a dynamic list of coins to reduce the adverse effects of industry-specific regulations.
The Whale
A crypto whale is a person who acquires large amounts of cryptocurrency. Their activities, whether buying, selling, or trading, don’t go unnoticed within the community, as they influence market prices. When a whale buys Bitcoin, this signals a demand, so the rest tend to follow suit. By contrast, when they sell or dump a large portion of their holdings, price volatility is imminent. Crypto whales build their fortunes in several ways- they either HODL for a decade or trade every single day. In other words, they’re wealthy individuals who live in tightly-knit groups.
Many experts draw attention to the fact that crypto whales represent a threat to the cryptocurrency landscape because they can affect decentralization. Blockchains are influenced by token holders, who can vote on various proposals, such as decreasing or increasing compensation rates for lending, so more concentrations of big holdings make the decision-making process more centralized. And let’s not forget about liquidity. If the concentration of coins is locked in one wallet, smaller traders/investors are limited to the circulating tokens.
The Takeaway
Figure out what kind of crypto investor you are to pinpoint the right tools and strategies that will help grow your wealth. Knowing your personal style will give you peace of mind, so you’ll be more comfortable with your chosen path when market volatility or hot trends grab the headlines.
