The dark side of cryptocurrency: how commercial psychology affects market behavior
In recent years, cryptocurrencies have been gaining popularity as many investors and traders have been jumping on the market without fully understanding its complexity. Although some cryptocurrencies see as a revolutionary new class of assets, others only appreciate them speculation. An essential aspect that contributes to these extremely different opinions is commercial psychology.
Trade psychology means mental biases, emotions and mental models that affect our market decisions. As for the cryptocurrency trade, it means how we perceive and respond to various market incentives. Are we rational or emotional? Do we make reasonable decisions based on data or are we are determined by fear, greed or other psychological factors?
cryptocurrency psychology **
Studies show that market traders are characterized by many irrational behavior, including:
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- Determination : Out of fear of loss, more than we value potential profits, traders can make impulsive decisions such as too much trade or too much risk.
The impact of commercial psychology on market behavior
When commercial psychology affects market behavior, it can have distant consequences:
- Increased instability
: The addiction of an emotional solution -the bias and the bias of approval can lead to a rapid change in price, which leads to increased instability.
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- Reduced trade efficiency : excessive confidence in intuition and emotional factors prevents traders’ ability to analyze complex market data and make reasonable decisions.
Analysis of cases: Impact of psychology on the activities of the cryptocurrency market
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- 2017 Crypto Bubble : The perfect hip storm, speculation and the bad decision that the claim has led to a catastrophic correction in the cryptocurrency market.
- 2018 Market Catastrophe : Making emotional decisions and approval biases have contributed to the rapid reduction in cryptocurrency prices.
Liberation from Commercial Psychology **
Although trade in psychology can be difficult to overcome, this is not impossible. Recognizing these bias and the acceptance of rational thought models can mitigate its effects on market behavior:
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- Be informed, but not too much to inform : You are constantly learning about market trends and changes, avoiding excessive news.
Conclusion
Trade psychology is an important factor in the behavior of the cryptocurrency market, which leads to irrational behavior to increase variability, the risk of loss and reduced commercial efficiency. By understanding the psychological influence that promotes our decisions, traders can take steps to overcome these biases and make more reasonable decisions.
