From a psychology perspective cryptocurrency behavior can easily fall into a number of categories, ranging from obsessive involvement to herd mentality. We've all seen various examples of different behaviors that defy logic but are clearly motivated by a desire to integrate or achieve more than just a simple presence in digital markets. That kind of emotional response that sometimes even goes opposite of what objective analytical signals would be encouraging, has time and time again been taken advantage of by savvy players keen on intentionally separating people from their money, Sam Bankman-Fried only being the latest in a long line of such characters (Sam never came close to Bernie Madoff, but the kid did make a notable dent in the record books).
There are the classic drivers and then there is the bizzare. The latter is where people who otherwise are extremely discipline and have spent their whole live being A-type personalities with extreme competitive edges and keen senses for risk make complete doofuses of themselves. Here's how things shake out:
Investor Sentiment Analysis
This is a fancy way of saying invest whichever way the market it going. It's also probably best described as lemming theory or herd mentality. Mob mentality might even be a good label too. The classic drivers of FOMO based in market opinion, greed and fear of being left behind on a big win drive buyers in this realm. People like to argue they are following good analysis, but in reality they are just doing whatever their friend is doing supposedly as stated in a forum, newsgroup, or social media platform. There's no verification the friend or contact actually made such a commitment, but the news spreads viral, and then it's off to the races.
This one is a bit more analytical and rooted in psychological group analysis. Biases and personal preferences drive buy and sell choices. In the crypto world, it's an effective tool in spotting the above, ergo herd mentality, as well as market opportunities lost due to discrimination and inherent bias. That can open up niche opportunities that the masses miss because they are focused on gossip and emotion versus good analysis.
Ideally, a technical analysis approach has no psychological influence whatsoever. In reality, bias preference still influences heavily at times. A good example would be Jim Cramer's Mad Money. For armchair/sofa investors, the show looks like it is rooted in technical analysis. However, in reality, people are just doing investor sentiment driven by a celebrity's opinion on what to do next financially. True technical analysis in crypto would be what everyone knows they should do but never practice: Do Your Own Research (DYOR). Why? DYOR takes time, energy and work. You have to learn what the tools mean to understand what they are telling you. Consumerism drives people to make decision on 10 seconds of information. DYOR work doesn't accommodate that kind of impulse decision-making, so people avoid it. Yet, in reality, DYOR is probably the best crypto trading approach, void of emotion altogether (or mostly).
Otherwise known as "pump and dump," market manipulation in the crypto world is well fed and alive. Due to the fact that there is little or no regulation, folks all over the place are trying to pump the next coin or token to basically get buyers to eat up supply. Doing so let's the holders offload their shitcoins to vapid but clueless buyers. The initial holders translate their nonsense into real gains and the new buyers end up with, you guessed it, digital shit. If people know this occurs so much, why do so many folks still become victim to it? Greed, FOMO, and wanting to get something for nothing are typical psychological drivers here. And market manipulators love it.
Built up over time, user experience is probably one of the most rooted forms of psychological influence in crypto behavior. We learn from trial and error. Some experiences drive us away entirely. Others reinforce more engagement. Depending on our track record, we lean towards where experience is consistently positive. While this is good when performance works, it can also drive people away from any future engagement as well. The hardest part with user experience tends to be trying something new, especially when it runs counter to what user experience has reinforced over time. People are ultimately fighting their own mind to break out and try a new risk.
Take a moment and think about your own trading, especially if you been engaged in the ups and downs since 2019. Which category above have you seen or experienced? Where are you now? Sometimes self-reflection can a bit alarming when you stop and really think about who you are as a crypto investor trader to day. But it can be extremely helpful in seeing the big picture as well.