Wednesday, May 22, 2024

What Are Diamond Hands and Paper Hands Investors in Crypto: All You Need to Know

The crypto sector, currently valued at $1.09 trillion, has attracted a lot of users from around the world to its platforms and services in recent times. While billionaires like Ray Dalio and Michael Saylor have equated Bitcoin to digital gold in the past, the frenzy around gaming-related cryptocurrencies as well as meme-based altcoins like Dogecoin, Shiba Inu, and the newly launched Pepe Coin testify to the rising craze around the digital assets sector in different countries. Despite this spree in adoption, the crypto market continues to remain highly volatile, lacking rules and regulations to make the sector safe and more stable for investors to participate in.

The crypto sector has an expansive glossary of terms and jargons, which are used to classify investors on the behaviours and patterns of their investments. Whales, for instance, are crypto owners who have saved a big amount of capital in the form of cryptocurrencies. Shrimps, on the other hand, are investors who purchase small denominations of crypto and trade them out for funds as soon as the market goes up.

Diamond hands and paper hands are also two categories, under which crypto investors are often divided depending on their risk appetites.

Diamond Hands

Crypto investors and traders who hold their cryptocurrencies for an extended period of time, often come across as long-term market participants.

The term ‘diamond hand’ refers to those crypto traders, who choose to keep holding on to their crypto assets regardless of the ongoing market situation.

Diamond hand investors wait patiently for the crypto tokens in their possession to at least reach their expected highest pricing, before considering if they wish to sell their tokens or not.

Traders who are categorised as ‘diamond hands’ are also often seen as entities with high-risk appetite.

Diamond hands traders are capable of influencing the circulating supplies of cryptocurrencies, as well as their positions in the market.

In May this year, Ethereum diamond hands managed to accumulate 74 percent of Ether’s total circulating supply, which made up for ETH 14,350,000 or $26 billion (roughly Rs. 2,15,154 crore), Glassnode had said in its report.

As opposed to crypto whales who keep their crypto holdings intact for an unlimited time frame, diamond hand investors retain their holdings only until the tokens in their possession reach maximum potential.

Paper Hands

Crypto investors who sell their holdings at the first sign of market turbulence are classified as paper handed traders.

Since the crypto sector is infamous for its volatility, several investors choose to maintain their financial balance by quickly getting rid of their holdings.

These investors have a low-risk tolerance.

Swing traders and day traders usually fall into the category of paper hand investors.

The most recent incident when paper hand investors rallied in the space when a new memecoin Pepe Coin landed in the cryptosphere.

The newly launched token, inspired by popular meme character ‘Pepe-the-Frog’, registered a 7,000 percent hike in the first seventeen days of its launch. The discreet birth of this memecoin by anonymous creators is being met with both intrigue as well as scam concerns by the Web3 community.

After speculations of Pepe being a scam coin began making the rounds, paper hand investors quickly sold off their holdings.

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