BERLIN (CoinChapter.com) — When did traders catch the crypto fever, and why are digital assets still attractive despite their heightened volatility?
It is widely known that you buy low and sell high to make a profit.
However, not everything is so easy regarding real-life investments, including crypto.
A recent Reddit poll revealed that most traders entered the crypto world during or after the bull markets when prices were high.
The set poll showed that most respondents, 1,300 entered the market in 2021, when Bitcoin experienced an explosive rally and peaked at $69,000. Since then, BTC has fallen over 75%, as evident from the chart below.
Plus, the bear market rippled Bitcoin fluctuations through the altcoins as well.
Trading Psychology
So then, why did people enter the market at such high prices?
The answer lies in retail investor behavior.
There are two main kinds of investors – the whales and the shrimp.
The whales are big players in the market, experienced investors and traders that typically know how to play with big money. As a result, they usually drive the market trends with their heavy cash influence.
Shrimp are small retail investors who often follow the whales in turbulent times. But not necessarily because they understand their choice and base it on careful calculations. They might ride the hype wave or put their faith in whales.
However, shrimp and whale investment patterns diverge due to differences in risk management.
The bear market presents higher risks. When people don’t have much to invest, the wrong call hits them harder. Thus, the highly volatile market doesn’t inspire much confidence in people not well-versed in the crypto game.
Since 2021, Bitcoin has become more dependent on the broader market, raising the bar for newbies. In addition, traders need to be more knowledgeable and aware of the overall economic climate, which is not the case for many retail investors.
Crypto is Here to Stay Despite Heavy Losses
Evergrowing social inequality triggered Satoshi Nakamoto to create blockchain technology and cryptocurrency in the first place.
The following factors are still valid today – the tightly controlled banking system, the overpriced transaction fees, and little transparency.
Blockchain allowed for a faster, decentralized, secure, and more transparent way to govern assets and investments. No wonder many jumped on the bandwagon.
As the chart below demonstrates, Bitcoin has not fallen out of favor, despite the heavy losses.
As Pantera Capital outlined in their report:
“Blockchain’s resilience in the face of a terrible macro market for risk assets and historic idiosyncratic disasters is impressive….Blockchain is going to change the world. It will certainly survive these issues.”
When the current storm passes, more people might be diversifying their investment portfolio with crypto than today. But, as the Reddit poll suggested, “I wonder if the next bull run will be the one which brings on the greatest number of new people or many the one after it.”
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