Diamond Hands vs. Paper Hands: Unveiling the Psychology of Crypto Investors

In the world of cryptocurrency investing, two terms have gained significant attention and have come to symbolize different approaches and mindsets: Diamond Hands and Paper Hands. These terms represent the psychological characteristics of investors and their ability to withstand volatility and hold onto their investments. Understanding the difference between Diamond Hands and Paper Hands is crucial for anyone involved in the crypto market. This article will delve into the meanings of these terms, explore their implications, and shed light on the impact they can have on investment decisions.

Who are the Diamond Hands?

The term «Diamond Hands» refers to investors who demonstrate unwavering commitment and resilience in their investment strategies. These individuals have a long-term outlook and are willing to weather market fluctuations without succumbing to fear or panic selling. Diamond Hands investors firmly believe in the potential of their investments and remain steadfast even during turbulent times. They understand that volatility is an inherent part of the cryptocurrency market and are willing to hold onto their assets, anticipating substantial gains in the future.

On popular social networks for blockchain investors such as Reddit and Twitter, diamond hands are often displayed as emojis: 💎🙌. Often, many people who identify with this group share a picture or gif of a famous moment from the movie "The Wolf of Wall Street," where Leo Di Caprio says, "I'm not leaving!"

Let's look at the behavior of Diamond Hands on the example of launching an NFT collection.

Let's say a famous artist decides to release his own NFT collection. Diamond Hands investors who get 1-2 NFTs in their wallet won’t sell the pictures below the formed threshold price (floor price) on the marketplace. Even if the minimum sale price at the moment can be much lower than the price at which they bought the NFTs.

Diamond Hands investors are meticulous in their approach, meticulously studying the project and conducting in-depth fundamental analyses. By patiently waiting for the right opportunity, they can strategically sell their assets at a profit, ultimately maximizing their returns.

Who are the Paper Hands?

On the other side of the spectrum, we have «Paper Hands» investors. This term is used to describe individuals who have weak hands when it comes to holding onto their investments. Paper Hands investors are characterized by their tendency to panic sell at the first sign of market volatility or negative price movements. Unlike Diamond Hands investors, they lack conviction and often make impulsive decisions based on short-term fluctuations.

The term is displayed as a toilet paper and hand emoji: 🧻 🤲. It has a negative connotation and is often used to tease traders, NFT collectors, and other crypto investors.

Let's take a look at Paper Hands behavior using the example of launching an NFT collection.

For example, a famous artist decides to release his NFT collection. Paper Hands investors, who received 1-2 NFT of this artist in their wallets, react emotionally to any jumps in the threshold price of the asset on the marketplace. At the slightest drop in price or a small number of sales of the NFT collection Paper Hands in a panic seek to get rid of their crypto assets, even if they go into losses. More often than not, such investors don’t delve into the analysis of the project and investment volumes.

These investors follow this logic: I bought NFT for 1 ether, to sell my pictures for 0.8 ether in case of a sharp price decrease on panic. The main thing is that I didn't lose all my money, I was able to withdraw at least something.

This example shows the behavior of a Paper Hand investor. Look at picture number 2036 in the upper left corner of the marketplace page. NFT is priced at 0.001 bitcoin, much lower than the ones that follow it. We can see that the floor price was between 0.0030 and 0.0032 bitcoin.

How should a competent and prudent investor act?

Don't do as we showed above! Very soon we will announce the launch of the first project on the EXBI Launchpad. There will be a token sale, at the end of which you will have an opportunity to buy a certain amount of tokens of the promising project. Once you get the tokens, don't rush to sell them in the first minute. When the token will be listed, don't be frightened by sharp jumps and downward price movements. Keep in mind a simple thought: what was the point of going through so many stages of getting tokens, only to then sell them at a loss?

Never put tokens below the threshold price, you don't want to trade at a loss!

Why is it necessary to have a long-term view?

In the cryptocurrency world, just like in any other investment instrument, it is important to choose a long-term strategy and do the fundamental analysis of projects competently (read our article about DYOR). Diamond Hands, when holding their assets, are based on knowledge of the project’s potential, while Paper Hands tend to make impulsive decisions that lead to financial losses.

Be smart investors!