The Emotional Crypto-Currency Investor

Human emotion in the world of investing has always been a driving factor in stock price. The influence of emotion in investing has risen with advancements in technology. In today’s investment landscape, the need for a stock broker to play the stock market for you has disappeared. Now anyone can become their own personal stock broker.

Online exchanges started to become the norm for investors in the late 1990s during the now well known Dot-Com bubble. Companies like E-Trade and TD Ameritrade are just some of the few to survive the bubble burst. With online brokerages, came the increased popularity of at home personal investing. Instant buy and sell orders from the comfort of your home were a part of the first building blocks of internet age.

“Why go outside or talk to anyone when you can just do it all from the comfort of your bedroom?”

A volatile market can easily snowball to the extremes. Its not as frequent in the stock market compared to the Crypto-Currency market but there are great examples in history. Either from a market crash or boom, but usually extreme stock volatility is isolated to specific stocks or an industry sector.

Unfortunately for the Crypto-currency market, volatility is just a part of everyday life. That volatility weighs heavy on the emotional state of the crypto currency investor. Investors easily get shocked by such a huge sell off in the market that they panic sell to avoid massive losses. There are some hold outs but they are hoping that the market will make a quick turn around. In the case of Figure 1, after the most recent shock drop in Bitcoin’s price, there was a slow down in the selloffs.

Many investors whom hesitated to sell their holdings are now at an uneasy edge. Even though the sell offs slowed down, the price was still declining. Eventually the price hits a low breaking point that triggers sell stop limits but also a 2nd round of shock sell offs. This is when a majority of the uneasy holdouts start dumping their holdings in a last ditch effort to avoid losing any more money.

The crypto-currency marketing isn’t an easy market understand. Its easily manipulated and irrational. Only a few will get lucky and come out with a huge payoff while the majority will unfortunately suffer.

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