- Due to high customer demand, apps such as eToro, Robinhood and Revolut added Dogecoin.
- Novice traders sought tokens with a high ROI while accepting risks such as rug pulls.
- Quickswap and Pancakeswap projects were favored to the detriment of Uniswap due to high transaction fees.
- Dinocoins shone but were not as bright as meme coins.
Every crypto epoch is defined by a bull run that concludes with a “healthy” correction. In May 2021, a mild correction occurred, which saw most retail traders flee the crypto scene. Thus, traders in post-May 2021 are dissimilar to what the DeFi and NFT boom brought to the table.
Meme Season Primed Among Investors
With each occurring Bullrun, new investors flock to the market. IncomeSharks tweeted that inexperienced traders bring high levels of volatility because “they panic sell support,” suggesting they invest due to preconceived ideas of a get-rich-quick scheme.
On trading volume platforms such as Binance Smart Chain, PancakeSwap outperformed Ethereum by 600%. Traders have been drawn by the low network fees and promise of a high yielding return. Moreover, Vice reports projects on BSC, are “simpler” to create; however, in contrast to established projects, they are fueled by empty marketing promises.
Traders have taken Doge as a pillar of crypto success, succeeded then by Shiba Inu, which surged by 32,500%. However, data shows more than one-third of investors had no understanding of the crypto market, while only 16.9% fully understood the market. In that regard, new users were susceptible to what Dogecoin’s owner called a “cult-like ‘get rich quick‘ funnel” designed to attract funds from the “financially desperate and naive.”
Innovation Favored Over Legacy
As market cycles go, dinocoins such as Ethereum, Litecoin, or Monero had their moments of stride. However, newer blockchain alternatives such as Solana, Polkadot, and Polygon/Matic piqued investor’s interest. While Ethereum facilitated DeFi’s emergence it faced criticism due to absurd transaction fees, platforms such as Cardano or Solana promised the moon.
Still, Ethereum is the dominant platform in the dApps arena, whilst others have continued to challenge its hegemony. Supplementary chain providers such as ChainLink, the Graph, and Polkadot gained a reputation, as traders speculated on the “what if” impulse, fueled by social platforms such as 4chan and Reddit.
Although legacy blockchains have had their rallies, projects with a more substantial gain have overshadowed them. For example, Thorchain increased by 2,000%, while Solana, a smart contract platform, increased by 1,500%. All the while, other blockchain byproducts gained momentum driven by future price speculation.
On The Flipside
- China initially banned ICOs during 2017 due to their highly speculative nature and large number of scams.
- Mark Cuban also invested in a rug pull.
- Increased regulation will promote blockchain’s value instead of investing with the scope of gambling.
- TikTok banned FinTok for allowing users to promote cryptocurrencies or other investment products.
Focus Diverting Outward
Investing in blockchain platforms is a done deal. Some might say it’s a 2017 fad, which no longer constitutes an anchor for sustainable passive income.
Traders identified new financial opportunities outside Bitcoin’s safety net. Institutional investors have mitigated their risks by investing in select digital assets. As Reuters reports, a new study shows that over 90% of surveyed companies consider investing in digital assets. Moreover, Venture Capitalists and serial entrepreneurs such as Gary Vaynerchuk and Mark Cuban have reinforced the status of digital assets by purchasing NFTs or investing in platforms such as MATIC.
Moreover, high user demand pushed platforms like eToro, Robinhood and even Binance to give into user pressure and list cryptocurrencies without substantial value, such as Dogecoin. In contrast, the popular trading platform Robinhood reported over $30 million in profits from Doge trading alone.
To that end, the idea that innovation and curiosity increase investment interest becomes inaccurate. Retail, similar to venture capitalists, has had a similar approach during the first half of 2021. Potential risks outweigh the financial benefits. Thus, memecoins have been preferred by retail while institutional investors have backed Bitcoin and Ethereum due to their store of value.
Why You Should Care?
Understanding the trader profile in the first half of 2021 helps you understand why markets behaved the way they did and also helps perceive investment motives. It also helps the market and regulators prepare better to avoid crypto scams and rug pulls and promote blockchain value over shallow projects perpetuated by crypto influencers.