The term "paper hands" is used to describe investors who sell their assets quickly out of fear and lack of conviction.
On the other hand, investors with "diamond hands" have faith in the eventual profitability of cryptocurrencies (or stocks), even if their value drops in the short term.
The term "paper hands" has become a popular slang used to describe investors who panic and sell their holdings at the first sign of a market downturn.
Paper hands lack conviction in their investments and are easily shaken by market volatility. These investors tend to sell their assets quickly, often at a loss, out of fear that the price will drop further. The term "paper hands" derives from the notion that these investors hold onto their assets as long as the market is doing well, but as soon as the market turns bearish, they fold like a piece of paper.
The term "paper hands" is often used in contrast to "diamond hands," which have strong conviction in their investments and are willing to hold onto them despite market turbulence. Diamond hands investors are more patient and tend to believe in the long-term potential of their investments. They understand that market volatility is a normal part of investing and are prepared to weather the ups and downs of the market.
Investors with paper hands tend to be more reactive than proactive, meaning they make investment decisions based on short-term fluctuations rather than long-term trends. They are often influenced by fear, uncertainty, and doubt (FUD) spread by the media or other market participants. As a result, they miss out on potential gains and often end up selling their assets at a loss.
Paper hands can also have a cascading effect on the market. When a large number of investors panic and sell their assets, it can trigger a market downturn, leading to further panic selling. This can create a vicious cycle that drives the price of assets down, causing even more investors to sell.
Paper hands often lose money because they make investment decisions based on short-term market fluctuations rather than long-term trends. Here are listed the reasons:
If you are a cryptocurrency investor, and your investment thesis remains intact, it may be worthwhile to develop "diamond hands." This is especially true if the underlying technology and adoption of the cryptocurrency are improving, and the market price has dropped due to emotional investing.
Having "diamond hands" can allow your wealth to compound over the long term and prevent you from selling at a loss.
However, it can also cause you to hold onto cryptocurrencies that have reached their peak. In such a scenario, "paper hands" may be a better option. "Paper hands" are preferable if your investment thesis has changed, or you no longer believe in the cryptocurrency. In these cases, it is better to cut your losses and move on. "Paper hands" are also preferable if you require the money for an emergency.
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On the other hand, the term "paper hands" describes an investor who sells their assets at the slightest sign of trouble.