There are 5 main types of cryptocurrency investors and there is a relationship between the type of crypto investor and your potential for profit.
First, let's get clear about what a cryptocurrency investor is.
What is a Crypto Investor?
A cryptocurrency investor is a person who buys, holds or trades in cryptocurrency.
Anybody can become a cryptocurrency investor and because cryptocurrency is virtual, that is it doesn't exist physically, it's very easy for anyone, anywhere to acquire it.
Investing in cryptocurrency is as similar to putting money in your bank account. With cryptocurrencies, there are literally tens of thousands to choose from and it is entirely up to you which ones you choose to buy, hold and sell.
How do I become a cryptocurrency investor?
The most common and preferred method is to purchase cryptocurrency on an exchange, whereby you convert fiat money into cryptocurrency. There is no maximum or minimum amount you need to purchase to be considered a crypto investor.
What is the difference between crypto investors and traders?
Crypto investors typically invest in cryptocurrencies based on an analysis of the fundamentals of a project with an intention to hold for the longer term, while cryptocurrency traders typically only hold cryptocurrencies for the short term with the intention to make a quick profit by leveraging market volatility.
Do crypto investors make money?
Certainly! The cryptocurrency market has been the fastest-growing financial market in recent history and many individuals have made life-changing wealth in this space. However, it needs to be noted this it is also a highly volatile market that does involve a high degree of risk. There are many individuals who make their living buying, selling and trading cryptocurrency full-time.
The 5 Types of Cryptocurrency Investors
Here is a list of the 5 most common types of cryptocurrency investors:
1 - The Newbie
This is a person who is new to the cryptocurrency space. Most newbies get into crypto typically during a bull run, which is when there is a lot of hype and FOMO (Fear of Missing Out) in the market. It's when the media is flooded with content about the cryptocurrency market and the profits people are making on their investments.
While there may be a lot of profit taking, it's also considered to be one of the worst times to be getting into the crypto market, as it generally is a sign the market is approaching or near its peak. Unfortunately, newbies are often stuck 'holding the bag' when it comes to cryptocurrency. Of all five types of cryptocurrency investors are the most likely to suffer the greatest losses.
2 - The Trend Follower
Many new cryptocurrency investors fall into the "Trend Follower" type of cryptocurrency investor. These investors aren't newbies but are still relatively new to the cryptocurrency space.
The trend followers are typically individuals who look to social media influencers for insight and direction on the next cryptocurrency to buy. While trends are an important part of cryptocurrencies they can also be very misleading as there are many scams (pump & dump) promoted by unscrupulous influencers. It is for this reason, it's very important to be able to DYOR (Do Your Own Research) before making any investment decisions.
3 - The HODLer
A 'HODLer' is a crypto investor who holds onto their cryptocurrency investments for the long term, not willing to sell at any cost. The term "HODL" originated many years ago from the misspelling of the word "HOLD", which has become a popular crypto meme and has stuck with the community ever since.
HODLers are investors who believe in the long-term growth potential of the project and are willing to see it through. Projects which are typically HODLed are those with long-term growth potential.
HODLing has become more popular with the offering of passive income options such as staking, farming, and pooling services which provides crypto investors the ability to effectively earn an 'interest' on their crypto holdings. These incentives can help HODLers get through the tough times in the market.
4- The Early Adopters
Early adopters are those crypto investors which are knowledgeable about technology and are able to see the future potential. Someone who invested in Bitcoin twelve years ago would be considered to be an early adopter.
The great thing about blockchain technology (the foundation upon which cryptocurrencies are built) is that it is at the cutting edge of technology and there are always new technologies coming out. This can be one of the greatest markets to be in if you are knowledgeable about technology and have the ability to see future potential.
5 - The Day / IntraDay Trader
Traders are those individuals who are looking to make a profit on a quick trade of a specific cryptocurrency. They are not concerned with the fundamentals of the projects, only the potential to earn a profit from a trade, lasting from a few minutes to a few days (intraday).
Traders leverage market volatility to make a profit and have the ability to make a profit when the market goes up or goes down (shorting the market).
Traders are skilled at readying chart patterns to determine the most probable market movement (either up or down). Traders are likely the highest-risk type of crypto investors but also have the potential to earn significant gains (or losses) on their trader.
Is Crypto Still a Good Investment?
A big question asked by those new to cryptocurrency is the question of whether is crypto a good investment. The answer to this question is its own article and is certainly worth a read.
What Is The Most Profitable Type of Crypto Investor?
There are pros and cons to each type of crypto investor. Newbies are at a significant disadvantage because they are not familiar with the market and the same can also be said for many who fit into the trend follower category. There are many individuals who have made life-changing wealth who fit into the trader, HODLer, and early adopter categories.
To a large degree, the type of cryptocurrency investor you are is largely dependent on your personality, risk profile and objectives.
No matter which type of investor you fall into, the greatest returns on investment within the cryptocurrency space have been within the small-cap market. The types of projects with massive growth potential are typically referred to as low-cap gems. If you would like to learn more about these types of investments, subscribe to our crypto investor newsletter.