Cryptocurrency has become a new trading asset all over the world. This digital currency has grown exceptionally in the decade. The market size of Cryptocurrency grew to $1.49 billion in 2020. This huge growth grabs all investors’ attention and market exports towards this digital money.
The world is going gaga over the rapid growth of Cryptocurrency. And the ROI is unmatchable! Do you want to embark on your investment journey in Cryptocurrency? For that to happen, you’ll have to understand the latest investment behaviors in Cryptocurrency. To catch up on all the latest information, read on!
Behavior
Choice of Investment
Investors of crypto show different behavior that is common all over the world. This can be proved by analyzing different data and statistics collected by performing surveys in different regions. These behavioral characteristics of investors can be categorized into three different models. The first model shows a significant growth in the desire to invest heavily in the crypto market. The next category does not show any interest in investing here. And the last model shows partial interest in crypto. They wish to go for crypto in the near future.
The study conducted in Australia showed that 72.8% of the investors were invested in crypto, 11.9% were planning on investing in the future, and 9.9% did not carry any intention to invest ever. Similarly, in China, the stats were 29%,27%, and 44%, respectively.
As crypto is a digital currency, it attracts people associated with the IT sector. It may be due to their expertise in the field. On the other hand, the people who believe in investing in equity are not likely to invest their money in crypto. Crypto behaves to be unstable throughout time. It is a significant reason behind the reduced participation of women in investment. Most of the time, they reject the notion of investment in digital currency. People earning around 1000 AUD to 2500 AUD per week and also the people with bank jobs are the ones with higher intention to invest in crypto now.
The Crypto market is being pulled back by several nations. Due to its instability, they are unwilling to enter the digital currency world. They do not consider Cryptocurrency as a legit transaction medium. This resulted in speculation and skepticism in the minds of investors all over the world. There was a constant fear of losing money if the government banned crypto in their country. This pulled the investors away from the crypto market.
Choice of Cryptocurrency
Investors always try to keep their portfolios diversified. This keeps them under minimum risk. This changes the behavior of the investor as their preference for ICOs differs. There are seven types of ICOs that give a wide range of choices to investors all over the world.
- Currency coins
- Trading tokens ( used for trading energy, healthcare, and water)
- Commodity tokens ( for assets’, goods’ supply chain)
- Identity Management Tokens
- Social Platform Tokens( Like Telegram)
- Cross Chain Tokens
- Marketplace Tokens( like Airbnb, rental platforms, and buying and selling)
The populous believes that currency coins are a favorable option to invest in. It is a liquid commodity that fluctuates a lot. Hence short-term profit can be earned through currency coins. On the other hand, you have to stick to the token for a long time to earn profit. The tokens generally grow gradually and guarantee a long-term profit or dissolve in their initial period.
Currency coins like Bitcoin, NEX, and Binance are strong competitors of the other types of ICO tokens. This has divided the investors into two categories. The first groups of investors focus on currency coins, while the other group advocates for tokens.
It is observed that investors with high-paying jobs, wholesale backgrounds, or with no jobs are interested in coin investments. People belonging to the age of 18 to 30 mostly prefer to buy other types of ICOs rather the investing in coins.
Factors Affecting Behaviour
High Risk
Cryptocurrency comes with extremely high risk. Investors who are open to tolerance get involved in it. Due to the constant fluctuation in the rates, the uncertainty of the return varies. During the later 2017s and early 2018s, investors worldwide faced trust issues due to the dropping rates of crypto. The highest fall of 85% created a speculation bubble in investors’ minds.
In addition, the lack of regulation of the ICOs has made people question the market’s legitimacy and profit. People were skeptical about the occurrence of various issues, including cyberattacks, fraud or fake ICO, illegal transactions, etc. They also speculated that the government’s actions might affect their investments. There may be a banned over the crypto or an economic breakdown due to regulatory or legislative uncertainties.
Attributes of ICO
A significant change in behavior among the investors is seen due to the attributes of ICO. They are greatly affected if the government or public organizations regulate the ICOs. Advertisement and Marketing of ICO can highly influence the choice of an investor. Long-term plans to expand the direct project investors to buy ICOs. It is very common for the selection of an ICO to be highly manipulated by the recommendation of other people.
ICOs with a user-friendly Wallet Interface, Developed technological Platforms, rewarding plans, and Fundraising strategies attract investors. Where ever they feel to have better price stability, they go for it.
Investment Plans
The investment plans of an investor can also influence the proper choice of ICOs and their approach toward cryptocurrency investment. If the traders get involved in the short-term market, their behavior towards crypto will direct them to currency coins. On the other hand, people with long-term goals are seen to engage with tokens. The strategies investors use to make their portfolios will greatly impact their investment behavior.
Means of trading cryptocurrency
Buying or selling a cryptocurrency depends on which platform the trading process can be hassle-free. After the rise of online exchange applications all over the world, investing in crypto grew exponentially. This ease of crypto trading helped crypto grow to different heights. Other means of trading are Social networks, Bank transfers, and Foreign Exchange also puts affect the behavior towards crypto by the investors.
Unpredictability of Crypto
Since crypto came into the limelight, it has never been stable. Its dynamic feature has made it subject to doubt and speculation. The growth is never consistent, and there is uncertainty about its fall and rise. Investors are a bit skeptical about seeing this changing status of Cryptocurrency. Many investors assume that Cryptocurrency is just a hyped trend. It does not have a clear future in the market.
Lack of Knowledge
The crypto market is facing the biggest drawback: a lack of information and awareness about digital money among the common people. The experts of the IT sectors invest extensively in crypto, but the common people being, unaware, are far from this trading zone. Their least knowledge prevents them from being a part of it. They can not tackle the risk factor because they do not understand the complexities of blockchains in the cryptocurrency system.
They are usually confused about ICOs and different coin currencies. They fail to choose the right type of crypto that will give them a profitable return. People do not know the basics of it, what it is, how it works, how you can invest, and how to trade. This information is explained elaborately to the common people and may increase the number of investors in crypto. Only then can you expect to notice a positive behavioral change among the investors.
General issues of people related to crypto
Several surveys have been conducted all over the world on Cryptocurrency. These surveys have presented data that tells us about people’s general issues while trading with cryptos.
- By seeing different countries’ actions of putting a ban on crypto, people have been questioning crypto to be illegal.
- Due to insufficient laws towards crypto, people could not develop trust in it.
- The usage of Cryptocurrency is a bit complex that stands as a barrier.
- Failure of investment is a great fear among the people.
Conclusion
This report shows us that the behavior of the investors towards crypto depends on various factors such as their jobs, portfolios, knowledge, market capitalization, and many more. Cryptocurrency has grown exceptionally well in recent times. That also acts as a reason to attract investors to this market. The returns of crypto displayed in this last decade encouraged investors to take high risks.
In a nutshell, the investors involved in the trading of Cryptocurrency are observed to take high risks. They become active traders after investing in their first crypto. Their behavior is noticed to be a bit inclined towards short-term trading, which makes them vulnerable to investment bias. This detailed study showed their latest behavior in the current times.
