Cryptocurrency also known as crypto is digital money or virtual currency which uses cryptography to secure financial transactions, helps to control additional units that are being created and also to verify assets that are being transferred.
In cryptocurrency, transactions are secured, and anonymous, and do not need to rely on a third party to send crypto to another person. Also, you do not need to know a person´s personal identity or having to know which bank they operate in, their credit card company or government to make transactions with them.
Cryptocurrency operates on a blockchain and is not like traditional fiat currencies being issued by central banks. One of the characteristics of crypto is that it is decentralized, meaning it is not controlled by any government, financial institution or third party, but the transactions and the units issued are governed by the consensus algorithms and cryptographic agreement. The main reason for decentralization is to terminate the need for intermediaries like banks and then allow peer-to-peer transactions.
The major and famous cryptocurrency is Bitcoin which was introduced in 2009. The introduction of this crypto brought thousands of other cryptocurrencies which are known as altcoins and these cryptocurrencies operate on their own blockchain.
One of the significances of cryptocurrency is how it has brought opportunities to the world of finance. Thanks to the power of the internet and also blockchain technology where it is possible to send and secure payments in the global world. Other benefits are diversification, the speed of transaction, and transparency, it can be accessed anywhere and at any place and time. Cryptocurrency enables investors to diversify from their traditional financial assets such as stocks and bonds, for instance, if their stocks and bonds portfolio goes down, their crypto assets may go up, and vice versa. Anyone can use cryptocurrency, provided there is a computer, smartphone and stable internet.
Types of cryptocurrency investors.
We have different types of investors in cryptocurrency and using the coindesk.com, I will be highlighting three of them which are:
The Crypto Curious: This is a type of investor that shows interest in diving into investing in cryptocurrency but is yet to take action because of the fear of losing a lot of money and the fear of technology. Sometimes, they are only waiting to get the necessary information about crypto from their advisors or mentors so they do not miss out on some things to get them started. These kinds of people are curious to join once they see someone close to them making money through crypto and are showing interest in learning how it works. For people like this, all they need is to learn about technology and a beginner's guide to cryptocurrency.
The Crypto Newbie: This kind of person has already started dabbling into cryptocurrency and is trying to get the ropes around crypto. The funny thing is that a newbie might own a lot of cryptocurrencies in his or her wallet but does not possibly know how to trade or purchase them on exchanges and will have to understand a lot about crypto to continue his or her journey in the blockchain.
The Crypto Native: This is referred to as a whale as he or she has been into crypto for a long time and already knows the in and out of how to operate crypto and technology. Crypto natives can be extremely wealthy and they are in the business of guiding the newbies on how to go about learning about cryptocurrency.
What are investment behaviours in cryptocurrency?
There are numerous types of behaviour when it comes to investing in cryptocurrency. We have:
HODling: Hodling is a misspelt word for hold and is a common word used in cryptocurrency which means the ability to hold a cryptocurrency for a long term regardless of price fluctuation in the market. Those who hold crypto for the long term are known as HODLERS and they believe in the long-term potential of crypto and are not tempted to sell even when the market is down.
Buying the Dip: This is a behaviour by investors to take advantage of the low price of any crypto to accumulate more so that when it rises, they make huge profits. Investors believe in buying the dip when the market is down as they see it as an opportunity to enter the market at a perceived discount.
FOMO: This is referred to as Fear Of Missing Out. It is an intense feeling that someone is missing out on a big thing in the crypto space. When everyone is talking about a particular crypto, such a person might run into it for fear of missing out on a huge opportunity. FOMO can enable investors to make impulsive decisions about their investment for the fear that they might lose out if they do not jump onto the opportunity at the right time when everyone is hyping about it or taking advantage of the price increase of a cryptocurrency.
Day Trading: This is when an investor buys and sells cryptocurrencies within a single day as he closely monitors the market trends, charts and indicators to make fast and immediate trading decisions. The behaviour includes active involvement, constant monitoring, technical analysis skills and strategies to manage risks.
Swing Trading: This involves an investor holding a cryptocurrency for a short term, normally a few days to several weeks in order to capture the trends and price swings so that they can profit from both upward and downward price movement.
Diversification: This is a strategy in investment whereby an investor spreads his or her assets across different assets so that his or her portfolio is not exposed to any risk that may occur. Diversification in the world of crypto will help an investor to lower their portfolio risks because there are some cryptocurrencies that perform well at different times.
Lastly, some factors influence these behaviours. The truth is that the cryptocurrency market is a risky one, volatile and there is fluctuation in the price of the assets, however, this does not stop most investors not to dabble in it for their own gain, especially those who have already gone deep into the business. Some of the factors are:
Number one, cryptocurrency is a way to make individuals express their freedom and opposition against the authorities. This is because they know cryptocurrency does not allow any third party as they can freely do transactions on their own.
Number two is that, they see cryptocurrency as a way to help them learn about digital currency and as a new method of investment. Though they understand and know the risk they may face in the future, it still does not stop them from investing in an unusual way.
Number three, the development of technology in the financial sector of cryptocurrency sparks individuals to be curious about using crypto and also investing in it.
In conclusion, while cryptocurrency brings about numerous opportunities and benefits to us, there are also challenges and risks involved. Understanding the complexities of cryptocurrency and the impacts it brings on the financial world is necessary for individuals, businesses and policymakers.
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Posted Using LeoFinance Alpha