The term ‘long-term investor’ has become a common line in the cryptocurrency niche. Many crypto traders claim to be long-term investors with absolute certainty. Yet, rarely does their actions nor philosophy correlate with their individual investment decisions. It seems misrepresentative that people claim they are investing for the long-term yet you find most doing minute to minute market analysis, anticipating the perfect time to buy bitcoin or any other asset with the aim of making quick returns.
When you check most exchange and p2p platforms, the first thing you’d see is the intra-day chart. This begs the question, why is there so much focus on the short-term market cycle if most people claim to be long-term investors?
It seems many are caught up in the hype of trading strategy that they haven’t given it a thought to properly define what it means to be a long-term investor or short-term investor. Knowing the difference between these two terms can help investors make sound and rational investment decisions. This article aims to clarify the difference between long-term and short-term investors.
Find out the best exchanges to buy Bitcoin in South Africa.
Who is a long-term investor?
The term ‘long-term investor’ is a vague concept as there is no general definition of the term. Most times, people often use the length over which investments are held to define the term. Surely to be a long-term investor, you must have held an investment for some years, if not decades.
However, using the period of holding assets to describe what it means to be a long-term investor is quite unsatisfactory. This is because no rule-book or law suggests the number of years that an investment needs to be held to be long-term. While “investor A” might prefer to hold an asset for a year, “investor B” could prefer holding for over 5 years.
Nevertheless, it can be argued that long-term investors generally exhibit two key attributes. First, they have high discretion over when they trade, and the price at which they will trade. This means long-term investors have high patience endurance. They feel minimal pressure to trade when the market is moving downward. They aren’t bothered that their investments do not pay off immediately. Thus, they will continue to hold as long as it is necessary.
Second, long-term investors approach investing with a long-term mindset. They are primarily concerned with long-term outcomes, setting their targets on long-term goals, and working towards them. This can be noticed from their investment approach and the information they use in making decisions.
In cryptocurrency, long-term investment means when an investor chooses to hold an asset despite price rises or poor market performance. Typically, this is seen as an investment philosophy. HODL which is an acronym for ‘Hold on for Dear Life’ is this term the crypto community used to describe the process of holding through any market volatility.
For example, if an investor should buy bitcoin worth $1000 when it launched in 2009. He then resists the urge to sell through the many highs and lows, the investment would be worth millions of dollars now.
Two factors can affect a long-term investor, FOMO which is the fear of missing out, and FUD, the fear of uncertainty and doubt. These two can make investors sell at low prices, ultimately making a reduced profit than initially intended.
Who is a short-term investor?
Generally, short-term investors are those who look to profit from short swings in the market and market volatility. Short-term investors typically take advantage of price changes and market fluctuations to make as much profit as possible. Examples are those who buy BTC or any other crypto in anticipation of a price rise in the short-term.
They are usually concerned with factors that can affect asset prices. Thus, they focus more on aspects such as news, market trends, the actions of other investors, and every other thing that may lead to short-term market moves. They are not concerned with long-term value. Instead, they look to focus on how to make a quick return on their investment in the short term. Short-term investors play an important role in crypto markets by providing liquidity.
Short-term investors look to profit from an asset through price movement. For example, if the market analysis indicates a likely increase in the price of bitcoin, short-term investors will buy bitcoin now in the hope of making a return when it rises. They typically make use of numerous intraday strategies to profit from price changes of different crypto assets. They employ a wide range of technical analysis and marketing techniques to capitalize on perceived market inefficiencies.
Traders can be categorized as short-term investors. So the easiest way to become a short-term investor is to start day trading. You can easily start trading on Remitano p2p or on a spot exchange. The process is quite easy; buy bitcoin or any crypto-asset at a certain price and sell it whenever the price increases.
