Many Crypto Investors Are Bailing While Others Are Rushing In

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There is a whole new legion of investors who are jumping on the crypto bandwagon. Both young and old are putting their money into Bitcoin, Ethereum, Dogecoin, or any one of a myriad of other coins.

Investors are being drawn in by the spectacular gains that started late last year, or they are all excited about Dogecoin. Whatever the reason, these predominately young people entered the world of crypto looking to capitalize on the hype or to ensure they did not miss the boat on the next big thing.

With the sinking value of crypto, many are getting out, and swear to stay out. On the other hand, other crypto investors are staying in, confident of things turning north as quickly as they turned south.

Many young crypto investors do not want to bail out on something they have just ventured into.

The Flood of New Money

After a few relatively quiet years, last December saw Bitcoin notch up one record high after another. The Bitcoin mania rocketed when Tesla, the budding electric car venture of Elon Musk, announced that it would accept Bitcoin as payment for its vehicles.

On top of Tesla’s announcement came news that MasterCard and BNY Mellon, the country’s oldest bank, were expanding into crypto. These moves seemed to signal that crypto was gaining mainstream acceptance.

Investors, both pro and amateur, took notice of what was happening. In the opening quarter of 2021, over 9.5 million people traded crypto using Robinhood, up from 1.7 million in Q4, 2020, who used the app. Coinbase reported over six million active users in Q1, double that of the final quarter of 2020.

From there, things just got more frenzied. The Shiba Inu inspired Dogecoin took off in April, hitting an all-time high of 74 cents during May. This activity only attracted more Crypto speculators, some of whom shifted some of the action to spinoffs that have absolutely no practical value. These rather useless coins are referred to a “shi*tcoins” in the crypto community.

Lisa Kramer. Professor of Finance at the U of T (Toronto) studies investor behavior. She puts the mania down to people hearing about and reading about new traders, and not wanting to miss the boat.

Boom. Then it crashed. The crypto market was living up to its volatile reputation. Elon Musk, so keen on Dogecoin, tweeted that Tesla Motors no longer accepts Bitcoin for the purchase of a vehicle over concerns he had about the environment and the impact Bitcoin mining was having on it. The selloff wiped more than $410 billion off Bitcoins market value and a further $25 million off Dogecoin.

Some Fans Remained Resolute

Even in the face of such losses, some fans of crypto remained resolute. Many of those holding less than $37,000 worth of crypto took the opportunity to increase their holdings suggesting that declining prices equate to increased interest, at least with small investors.

Internet message board Reddit was active, with the believers encouraging each other to hold on and “buy the dip,” allowing them to lock in future gains. Some were rewarded as Dogecoin, which sank to $0.22 during the sell-off recovered to $0.40 early this week.

Investors Stay Involved 

Many investors in crypto say they are in the game to stay because they believe in the technology.

One small investor admits to having been a crypto skeptic but became intrigued by the frenzied action surrounding Dogecoin. With what she learned, this individual made a small investment in Ethereum as well as two tokens that were popular on Reddit’s crypto forum. It did not take long for her to begin checking the level of activity every few minutes.

Although the last few weeks have been gut-wrenching, this woman plans to stay in the game.

Rebecca Robinson, a student in San Diego lost a few hundred hard-earned dollars after Musk put the market in a dive. Even at that, she still puts 10 percent of her income from being a line cook into crypto.

She said, “There is a tendency for people to see coins as if they were sports teams.” If there are a lot of believers in a team, read coin, they are not about to sell when it drops any more than they would abandon their ports team when it slumps.

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