On Crypto-investing Psychology

Let me address some snares that most crypto-traders face and how you can sidestep them. Most of these have been identified by psychologists and so I am not re-inventing anything.

One is anchoring, which is essentially relying on only what you already know. This means that you ignore new and relevant information about a certain cryptocurrency and you end up having too much confidence in its future performance.

For example, there may be a lot of negative news on social media about a coin you hold, and you dismiss it as "haters spreading FUD" -(Fear. Uncertainty. Doubt), then it ends up dipping even more, or ends up being a dud (Failed project) - I won’t give examples in the interest of fairness.

The second trap is what is called situational blindness which can make the situation even worse. We usually can ignore the reality in the markets especially when we are experiencing a loss. We then procrastinate dealing with the situation for a long period. Heck, we may even fail to log into the exchanges to avoid seeing the depressing 'red' for a while. A better strategy is to get in there and learn what went wrong and learn from it.

Another is what’s known as the Confirmation snare, which is related to the former one. This works when you head over to your favorite social-media platform to find people who have made the same mistake as you; brings to life that old saying ‘birds of a feather- flock together’. Short solution, 'don’t do it!' Rather seek and accept advice from unbiased and new places. Also learn to do TA (Technical Analysis), stay abreast of all news crypto, and understand how the crypto market works (though we are still in the wild-wild west). But learning the basics of how the block-chain and the associated technologies work, as well as reading charts for yourself sure beats waiting for someone to tell you what to do.

The Superiority Snare is yet another one. Remember you cannot outsmart other investors nor the market, do not fall into the trap of thinking that because you are probably smart in another field, maybe have a few degrees, and so forth, you are above needing to consult those with more experience.

Then there is the Sunk cost snare. This is expressed when you are defending previous bad trading decisions, but it often leads you further into a hole. I get it; it is not easy to accept a loss or admit that you made a wrong choice. For example, you get into a coin at what you thought was the bottom, and then to your dismay, it dips further, much, much further. Instead of accepting that it is really hard to pick bottoms and that perhaps it is more prudent to place stop losses, you do it over and over and you get even more aggravated each time it happens. If a trade turns sour, the faster you get out of it, the better. Look there are always better coins that are heading the opposite direction. Do not be caught out.

Do not make emotional commitments to bad coins or projects, no matter what the HODL-gang is saying, it just makes things worse.

To avoid these traps, resolve to stay flexible in your approach and in incorporating the hard facts –even the grimmest ones, like for example projects, can fail and that coin in your bag can go to very low levels and stay that way for a long period or forever. That way you will always walk cautiously and make better-informed decisions.

In conclusion
Our psychology can be a dangerous thing. It is often easy in the heat of the moment, when stressed or tempted, to fall into these snares. The wrong insights, self-delusion, desperately trying to avoid losses, trying to find the comfort of other victims, ignoring reality and so forth, can cost you dearly.

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All in all, I wish you the best in this gold rush. Upvote, Share and Follow if you like this so I can do more content, THANK YOU.