The prominent users of cryptocurrencies today are average Joes’ who want to profit from the price waves. There are a host of other institutional players in the market who see the emergent world of cryptos as a meal ticket. They are keen to make a gain from price movements in order to record impressive profits.
Whether we are looking at the retail players or the big ticket investors, both parties are swayed by the profit motive. Now, let us look at the overriding marketing and consumer behavior of these two groups in closer detail.
The Sting of FOMO
The fear of missing out (FOMO) is real with users of cryptocurrencies. When EOS price prediction soared in mid-2018 Q2, there was a wild scramble for EOS tokens across crypto markets. The basis of the optimism was the expected airdrop announced for EOS.
In simple terms, every follower of crypto would love to have extra token or coin for free. There is a clear pattern of a surge in demand for specific cryptos when there is a credible oncoming airdrop. It is an accepted human behavior to embrace more for less whenever this is possible.
Many cryptocurrency foundations or governing boards have capitalized on the resurgence of interest in cryptos to add airdrops to their marketing spin. Since this pattern of behavior has become discernible, it is noteworthy and recommended for use as the crypto boom continues.
Buy Low and Sell High
When cryptocurrencies hit a low, it is an incentive to followers of the market to make a buy-decision. At this stage, it becomes necessary to determine if the price plunge has got to its ebb. Many informed traders are likely to place a buy-order when this happens.
The profit motive that drives commerce globally is predicated on buying at a lower price than you can sell. Otherwise, there is no basis for a trade. Cryptocurrency users are not any different when viewed against the background of profit-making.
There is no doubt that the selling and buying of cryptos show that the direction of the market largely influences user behavior. During a price surge, many people buy cryptos in the expectation of a further rise in price. When the ruling price starts to drop, transaction volumes in the market plummet to show a correlation that cannot be avoided.
Becoming an informed trader of cryptocurrency doesn’t happen overnight. A majority of Bitcoin users and buyers make a mad dash for the door as soon as a pattern of price drop emerges. This behavior is not limited to cryptos alone as the same happens in the stock market across the globe.
Exiting the market is the first panic response when there seems to be a sustained price drop at any time. When bitcoin price cratered at $6,000 early in 2018, market volumes were at the lowest mark in 24 months. The gradual rise in trading volumes recorded until the end of April 2018 shows that price drops affect user behavior negatively.
Pump and Dump Deception
Users of Bitcoin and other cryptocurrencies have become susceptible to pump and dump schemes. The orchestrated pattern is an artificial hype created in respect of a coin or token to influence a price surge. The main actors set out to buy the target crypto at low prices, and hype it so that there is a price surge.
It is clear that a few people are involved in this condemnable cycle of deceit. The recommended response is refusing unwelcome invites to spooky online communities, and to improve your knowledge of the market. The more an individual stays informed, the better will be the exercise of personal judgment in a buy- and- sell scenario.
When crypto community chat rooms are filled with spammy, and speculative news, the stage is set for a pump and dump scheme. Many crypto users who are unskilled in the underpinnings of the market usually fall prey to the disreputable behavior of others. Since individuals want an opportunity to make a profit, they can be easily influenced, but they lose out when a dump occurs.
FUD and Wrong Decisions
Fear, uncertainty, and doubt creep in when the price direction of a cryptocurrency looks discernibly cloudy. What might affect the outlook of a crypto depends on the use cases and response to user demand.
A majority of new entrants coming into the trading of cryptos are drawn by the market hype. The perception that cryptos provide a get-rich-quick path is alluring to many people who fail to understand how the market works. This is how a greater proportion of crypto users lose out to uninformed decisions.
As people become conscious of incurring losses in a FUD scenario, they are most likely to become emotional instead of objective. The truth about objectivity is that it is a function of enlightenment and knowledge. Again, any bitcoin user who must turn the page on FUD has to be well-informed.
Response to Government Pronouncements
At a point in time this past year, the rash of governmental interventions in Bitcoin regulation sent prices into a tailspin. Many users of cryptos were caught in a melee, and the uninformed rushed into a sell-off and incurred losses.
As the cloud over regulatory actions gathered towards the end of 2017, the volume of trade on crypto exchanges also plummeted. The response of Bitcoin and altcoin users to the development was one of despair. Not sure what the final outcome will be, many failed to exercise patience and study the market mood.
A careful analysis or application of the Warren Buffet rule of stepping in when others exit would have saved the day for many. However, since a grasp of time-honored investing principles doesn’t come easy, several users lost out.
The Rush for Freebies
The buying of cryptocurrencies can be attractive when there are freebies attached to it. Crypto exchanges have a range of freebies like discounts on transaction and deposit charges, free token or coin offers, among others. New entrants to the crypto scene are entranced by these freebies.
The introduction of affiliate incentives by crypto exchanges also means that newbies can be introduced or registered by existing users. The chance to earn $10 or more in referral fees has led to aggressive marketing online and on several fronts. Exchanges like Coinbase, Binance, and Kucoin have incentive schemes that incentivize registration of new customers through the promotion of affiliate links.
Many crypto websites and related blogs are adorned with banners and link text that promote registration of new users. This has become established across the countries and continents of the globe. It is factual that crypto consumer behavior is fairly predictable as long as there are tangible incentives to register new users.
Crypto Boom and Busts
Crypto price waves can be direct fallouts of consumer behavior resulting from the following identified factors.
- Entry into the market of a better-placed competitor
- Poor transaction speed
- High transaction cost
- Increasing susceptibility to bugs and hacks
- Support by more crypto exchanges
- Poor response to user community complaints
- Other matters that might arise from time to time.
Some of these identified shortcomings above bear a direct relevance to the two examples highlighted here:
The Bitcoin Cash Push
The market dominance of Bitcoin was considerably reduced when users began to notice that transaction costs were unsustainable. The fork of Bitcoin Cash created an alternative to the Bitcoin Blockchain and its poor record of transaction processing pace. The same concerns made the Coinbase user community mount a campaign for the adoption of Bitcoin Cash as a default payment option.
The action of users in the scenario above arose as they sought for a cost-cutting alternative to Bitcoin. It can be observed that consumer behavior with respect to cryptos corresponded to the rational economic man postulation. People will prefer A to B as long as it offered them an advantage of any sort.
Heckling of Ethereum
Ethereum emerged as a massive marketing success with its Blockchain becoming the backbone for the issuance of thousands of ICOs. However, users’ complaints about the loss of tokens due to wrong address usage or failed transactions are a source of concern. The groundswell of opinion against the shortcomings of the Ethereum Blockchain led to the evolution of EOS.
The hoopla raised by users over Ethereum’s drawbacks has spurred the evolution of Blockchains that offer transaction rollbacks. In essence, innovations like Blockchain 4.0 makes it possible for the rollback of transactions so that tokens sent to wrong addresses can be recovered.
Transactions made with wrong credentials on Ethereum and Bitcoin networks are not reversible, and this is a source of users’ discomfort. The insistence by users that it is time for rollbacks to be enabled for troubled transactions has seen the light of day. It is evident that newer algorithms will at least support optional transaction rollback.
There is no doubt that the consumer behavior of cryptocurrency users slants towards self-interest, profitability, and a preference for transaction efficiency. As more developments unfold in the marketplace of cryptocurrencies, it is certain that “the consumer remains the king.”
Stevan Mcgrath is a digital marketing professional who possesses expertise in brand design and development. Stevan is passionate about utilizing his diverse skill sets for new and innovative online marketing strategies. He has worked as a freelancer and a contributor to ProvenSEO. Despite having a wide influential reach, he seeks client satisfaction as his topmost priority. He also writes blog posts on recent digital marketing trends and Cryptocurrencies. To know his work and more details you can follow him on facebook, twitter, LinkedIn, Google+.
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