Investment trading is not a new word in the financial market. What is new however is the cryptocurrency investment trading. Cryptocurrency came to being in 2008 when a certain Sahtoshi Nakamato published a white paper online proposing digital currencies. It’s been a decade but by standards, cryptocurrency is still considered a new concept. But despite the fact that cryptocurrency market is a whole new concept that is different from the traditional financial investment markets like stocks and foreign exchange, the investment approach and choices among investors remains the same. This is evident as most of the investors can be categorized into two choice groups according to their investment choices; the ones who are all in with uncertainties and the ones who do as much as they can to play safe. Hence the risky and the conservative investment choice, in cryptocurrency investment trading.
CONSERVATIVE INVESTMENT CHOICE
The cryptocurrency market is a very volatile market. For an investor to decide to invest in the market alone, he or she have taken a risk. The conservative investor is not an investor that does not take risk, rather he is one that plays it safe according to the ‘never put what you cannot lose’ rule. He is categorized to be a moderate risk taker, with the preservation of current capital and income as the main goal. In the cryptocurrency market, there are many conservative investors. Going by the volatility of the market, this might be considered to be the safe approach. But with a conservative investment approach comes lower gain. Most of this class of investors, although have little to lose, they are considered to be on the bottom of the chain, with the high risk investors on top of the chain. One of most popular conservative investment choices is the diversification of investment. That is, not putting your eggs in one basket. For example, the prices of most altcoins are affected by the price of bitcoin, such that when the bitcoin is on a bullish zone, these altcoins go into the bearish zone. A typical conservative approach will involve playing safe with this discrepancy, thereby investing in different altcoins and not putting all investment into bitcoin becomes a safe approach. While this might be safe from all indications, it weighs down on the returns of investment.
RISKY INVESTMENT CHOICES
There is no conscientious definition for risk in financial markets. While some school of thoughts see risk as a measure of what an investor stands to lose, others see it as a measure of the uncertainties in the choices made by investors. Which ever school of thoughts you belong to, a look into the cryptocurrency market will spell nothing but risk. The fact that the value of a crypto coin is determined by diverse factors, which are out of the control due to the trustless and unregulated policies makes it more risky. For example, the interference of organised financial institutions can affect the price of a coin. Hacks, pump and dumps and 51% attacks also have high effects on the values of coins. However, despite the risk that is imminent in this market,it does not in anyway stop investors who are willing to go all in with their investments. Investors that make risky choices stands to gain more, just as they stand to lose more in the cryptocurrency market. A typical risky choice in cryptocurrency investment is found when an investor cashes all in into single coin. In the fourth quarter of 2017, the bitcoin was on a comfortable bull rise, this resulted into many investors taking risky investment choices; they invested mainly in bitcoin. We all know what happened to bitcoin in 2018. But no, risky investment choices doesn’t necessarily mean not knowing when to call it a profit, although most people argue that there is a thin line between greed and risky investment choices.
The classification of these investment choices cannot be overemphasized, however there is need to strike a balance. Making it big in the crypto currency market is somewhat a blend of the two investment choices stated above, with the right information being the determining factor. In other words, flexibility of choices is important as you have to know exactly when to make either the conservative investment choices of the risky investment choices. Also, it important that the fear factor should be differentiated from these choices.