We all want to know what drives the price of the markets. Truth be told, it’s not just one thing, there are a million different extraneous factors that cause price changes from economics and politics, to general news to the time, it’s essentially impossible to blame one single factor. We do however know of one factor that consistently plays a huge role in this, that is psychology and the mentality of a crowd, a recent survey by DataTrek proves just that.
According to reports, a new study carried out by DataTrek has highlighted that 52% of participants believe psychology is one of the main factors that drives the cryptocurrency markets up and down.
According to Market Watch, Nicholas Colas, the co-founder of DataTrek research has said:
“To our thinking, this was the single most surprising response of the whole survey. Finance professionals make their livings by analyzing asset values through the lens of fundamental/quantifiable factors. That more than half of respondents believe valuation in the crypto space is ‘purely a function of crowd psychology’ is refreshing in its honesty.”
Whilst 52% isn’t enough for this to be a psychologically significant finding it is important for investors to think about this sort of thing. When you see markets change, you need to ask yourself how much of an impact the community is having on this. Moreover, when one investor says sell, do you follow the crowd? If everyone does the same thing, how will this impact the markets?
In all honesty, cryptocurrency is a psychological phenomenon, it is a product with a reward scheme that can manipulate people into displaying a specific behaviour. Moreover, it can form teams, communities and even societies. Cryptocurrency can form ideology and discourse and honestly, in itself it is a discourse.
It’s complicated when you explore it, but we should always consider the psychology of crowds and investors when choosing to invest ourselves.