Investors, Traders and Speculators

Trading cryptocurrencies, investing into crypto and crypto speculating are three distinct ways in which one can engage in the action of buying and selling cryptocurrencies. It’s essential to understand the differences between these three types of crypto market participants to determine which better suits you, based on time orientation, risk tolerance, starting capital and financial goals.

Who are crypto investors?

A crypto investor embodies the virtue of patience amidst the wild volatility in the crypto realm. Investors tend to incorporate long-term, disciplined strategies which realize periodically-consistent returns on investments over multiple years. Typically, investors tend to be more risk-averse and so can be quite cautious and conservative with their actions. The behavior of crypto investors is similar to those of investors within the traditional financial market, such as stock investors.

Often associated with a long-term perspective, investors allocate their capital into cryptocurrencies with the intention of holding onto their assets for an extended period of time. They base their decisions on careful research, analyzing the underlying technology, project teams, and potential real-world applications of a particular cryptocurrency.

Many investors are motivated by the idea of supporting groundbreaking technologies or concepts that align with their values. Their approach is patient and strategic, with the expectation that the value of their holdings will grow over time. While they may encounter market fluctuations, investors maintain confidence in the long-term viability of their chosen assets.

Who are crypto traders?

A crypto trader engages in buying and selling cryptocurrencies on a more short-term time horizon when compared to that of investors. Typically, crypto traders seek to generate a consistent income from sporadic trading activity, which entails opening and closing positions in a matter of weeks, days, hours, minutes or even seconds.

The risk tolerance of traders is generally higher than that of investors, as they aim to bank substantial gains from short-lived price fluctuations. Hence, they tend to employ more capital on riskier trades while investors allocate funds strategically for lower yet more consistent returns.

Traders adopt methods & strategies which capitalize on small price change increments and take advantage of the heaps of profitable opportunities which come with it. This is done by studying the fundamental factors which influence the price of a certain cryptocurrency, such as the latest news surrounding a digital asset, alongside analyzing techincal charts, readings and patterns which dissect short-term price movements.

Those which engage in short-term trading on a regular basis seek recurrent patterns or themes which are familiar to them and this way, traders capitalize on the consistent profit opportunities which arise. This can be done

Who are crypto speculators?

In the world of finance, speculative trading is the act of conducting a financial transaction which has a high risk of loss but also has the potential to generate substantial gains. In terms of risk tolerance, crypto speculators tend to be on the more high-risk, high-reward side. They are predominantly motivated by the prospect of high returns which offsets the envisioned risk incurred.

Crypto speculators enter the market based on an educated guess on whether the price of a certain cryptocurrency will jump or fall significantly, based on news & rumors, frenzies, hypes, individual opinions or market sentiment. Speculative traders often trade on impulsive emotions rather than thorough research, and to this reason, crypto speculators can generate high returns which at times can be random, but are subject to the highest risks associated with the inherently volatile nature of cryptocurrencies.

Summary

It is not always the case that a crypto buyer & seller would fit into just one of these categories, as market conditions are continuously dynamic, and needs of market participants do naturally evolve & devolve. Not just that, but the influence of emotion in people can grow or diminish over time, and as market participants gain more experience, the nature of their market activity tends to recalibrate.

Nevertheless, it is safe to say that the ultimate goal of buying and selling cryptocurrencies is the same no matter what type of market participant you are: profits. Before you engage in cryptocurrency trading, investing and/or speculation, it’s important to understand and comprehend the degree of risk associated with cryptocurrencies, and to learn more about the most effective crypto trading strategies out there.