Cryptocurrency and the psychology behind it

Do people fully understand the reasons why cryptocurrency is considered as the “next big thing” or is it now just filled with those who join because it is getting the long-awaited attention? Here we discuss how behavioral economics may or may not be a factor for why cryptocurrency is increasing the interest of the average individual.

According to recent studies, cryptocurrency investors are relying less on expert counsel and more on peer investor groups for guidance.

For the first time, the daily value of crypto trading in South Africa surpassed $141 million, demonstrating that many South Africans believe the dangers of this complicated, unregulated market are acceptable in exchange for the potential gains.

Cryptocurrencies have been praised by digital supporters as the “new gang on the block, refusing to play by the established rules of engagement.”

For the first time, investors feel “liberated” from financial laws and are able to discover their own “facts.”

Given that many people find blockchain technology difficult to grasp and struggle to explain the extreme volatility in the cryptocurrency markets, it’s interesting that they primarily rely on online sources to shape their cryptocurrency investment strategies, such as social media and social news aggregation websites.

An era of information-enabled investors has begun as a result of the quantity of information from like-minded investors. Early adopters of blockchain technology and cryptocurrency, for the first time, had a better understanding of the underlying potential and trends than their qualified financial advisors.

Its worth is mostly decided by its distinct qualities and shared viewpoints.

The principle that people tend to revert to cognitive shortcuts or mental biases under conditions of ambiguity, complexity, and time constraint is one of the underpinnings of behavioral economics.

The network effect is responsible for this, as well as the rise in popularity of cryptocurrencies and the availability of information. The network effect states that the bigger the number of participants, the higher the value of the cryptocurrency.

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