The dark side of cryptocurrency: how commercial psychology is affecting market behavior
Cryptocurrencies have been gaining popularity in recent years, with many investors and merchants jumping into the market without completely understanding their complexities. While some see cryptocurrencies as a new revolutionary class of assets, others see them as a mere speculation. A crucial aspect that contributes to these very different opinions is commercial psychology.
Commercial psychology refers to mental biases, emotions and thought patterns that influence our decisions in the market. In the context of cryptocurrency trade, this means how we perceive and respond to several market stimuli. Are we rational or emotional? Do we make informed decisions based on data or are we driven by fear, greed or other psychological factors?
Cryptocurrency Commerce Psychology
The research has shown that merchants exhibit a variety of irrational behaviors in the markets, which include:
- FOMO (fear of getting lost)
: The pressure to constantly monitor market conditions and buy at any time available can lead to rapid entry and exit strategies, resulting in unnecessary losses.
- Emotional decision making : Merchants can make impulsive decisions based on emotions such as euphoria or panic, instead of carefully considering their investment objectives and risk tolerance.
- Confirmation bias : The tendency to seek information that supports our pre -existing opinions while discarding contradictory evidence can be carried out of precise ideas.
- Aversion to loss : fearful losses more than we value potential gains can lead to merchants to make impulsive decisions, such as excessive trade or take excessive risks.
The impact of commercial psychology on market behavior
When psychology trade influences market behavior, it can have long -range consequences:
- Increased volatility : Emotional decision making and confirmation bias can lead to rapid price movements, resulting in greater volatility.
- A higher risk of losses : Impulsive purchase and sale strategies, driven by emotions instead of analysis, increase the probability of significant losses.
- Reduction of trade efficiency : Excessive dependence on intuition and emotional factors hinders the ability of merchants to analyze complex market data and make informed decisions.
Case studies: the impact of psychology on cryptocurrency market performance
- The 2017 cryptographic bubble
: A perfect storm of exaggeration, speculation and poor decision making led to a catastrophic correction in the cryptocurrency market.
- The 2018 market accident : The emotional decision making of the merchants and the confirmation bias contributed to the rapid decrease in cryptocurrency prices.
Free yourself from commercial psychology
While commercial psychology can be difficult to overcome, it is not impossible. By recognizing these biases and adopting more rational thinking patterns, merchants can mitigate their impact on market behavior:
- Develop a holistic market vision : Consider multiple factors, including technical analysis, fundamental research and risk management.
- Practice emotional regulation : Learn to handle emotions, such as fear and greed, through techniques such as meditation or newspaper.
- Maintain informed but not overform : It is evidenced continuously on the trends and developments of the market, while avoiding excessive news consumption.
Conclusion
Commercial psychology is a significant factor in cryptocurrency market behavior, with its irrational behaviors that lead to greater volatility, risk of loss and reduced commercial efficiency. By understanding the psychological influences that drive our decisions, merchants can take measures to overcome these biases and make more informed decisions.