In the crypto markets, institutional investors are still mythical creatures. While some of them exist, most are said to be waiting for the Securities and Exchange Commission (SEC) regulations to play out so they can inject their funds into the market. Retail investors don’t think the same way. They may be drawn to the market because of the high returns it offers and then get burned with the huge volatility. Joseph Young, a Bitcoin investor, and Forbes contributor, noticed something interesting about the behavior of retail traders.
Crypto Traders Follow a Pattern
Investors in cryptocurrency markets are — largely — people who are lured into the possibility of getting humongous returns. Some of these could be first-time investors who have never experienced stock market trading before.
Here is what Joseph Young tweeted about them:
“This is the pattern I noticed with most crypto traders
1. Buy Bitcoin
2. Buy token/BTC pair
3. Make solid 10% gain
4. Become aggressive, go for more tokens
5. Loses out 10%
6. Try cover up losses
7. Lose even more BTC
8. End up with less BTC then they started with.”
According to this pattern, some traders may earn an initial gain when buying an altcoin with their BTC. “Geginner’s luck” perhaps. He then suggests that traders believe this success can be replicated, and go on to lose subsequent trades, reducing their BTC holdings as they go. A Twitter user @NomadNeal added a step 4.5 here. He suggests that traders can get emotionally attached to the coins in their portfolio, leading to their downfall.
Mistakes Beginner Investors Make in Crypto Markets
One of the first mistakes that people make is going with the current market hype and not doing their own research. Typically, many coins, especially initial coin offerings, are hyped. New investors are known to fall into the traps of promised high returns and technical jargon.
Joseph Young: Spend Your BTC on Altcoins and Risk “Ending up with less BTC” was originally found on [blokt] – Blockchain, Bitcoin & Cryptocurrency News.