At the time of writing Bitcoin has reached an all time high of $7400 USD ahead of the segwit 2x fork.

So while some are celebrating new highs others are wondering "When is the inevitable price correction coming?".

What anyone that believes strongly in Bitcoin and Crypto currencies success wants to see is steady sustainable growth for long term gains, as it is currently Bitcoin is far too much of a rollercoaster for general use.

You may recall the fable of the guy that paid 10,000 Bitcoin back in 2010 for 2 pizzas...

I hope they had pineapple on them because at today's value of nearly 74 Million that guy could have bought an island with an entire pineapple plantation.

Bitcoin as it is now is far to volatile to spend, or even trade because of its inherent potential value.
Large price corrections in the market causing sustained dips and mass sell offs driving the price down is one thing that can and will shake people into trading it away.
But why would anyone cash out at this point if it will only go back up again?

Well what we have to remember is not everyone has invested within their means, not everyone invested in Bitcoin is a sole trader and the market movers are trading on behalf of companies and Hedge Funds. People are instinctively driven to protect their investments.

If there is a huge drop why wouldn't they cash out at the top of that drop for maximum return and then re-buy even more during the dip?

In those two examples we can see some very diametrically opposed mindsets when it comes to market mentality.

It's like if someone offered you the hypothetical choice of a million dollars now, or investing it to make 20 million in 10 years time. Rationally people know they will potentially have a bigger return if they are patient and wait, but the immediacy of what you can do with that immediate gain right now is too tempting for some to pass up. And markets aren't rational.

Understanding the generalized psychology of the players in the market is an important part of building your strategy.

Traders, Investors and holders all have very different mindsets, ideally to navigate the Crypto Markets you'll need a balance of all 3.

Traders

Traders will always be looking for the next maximum leverage opportunity, they are willing to buy a Crypto and trade it as soon as they have hit their exit point figure. The more volatile the market the bigger the swing trade opportunities

Likes: Fresh ICO's, Scalp trading, Arbitrage, FOMO, FUD, Dips

Dislikes: Market Stability, ICO Regulation

Weakness: Impulsiveness in calm markets

Investors

Investors are looking to increase their wealth within the midterm but will cash out if there is sustained volatility to protect their investment, they mainly stick to Top 10 Cryptos to manage risk.

Likes: Sustained growth, A diverse portfolio, ICO's with a solid road-map for the next 2 years

Dislikes: Forks, Market Dilution, FUD

Weakness: FOMO

Holders

Holders have put nearly everything that they can into a Crypto already and are hoping for an increase to the moon in the long term and willing to weather the severest of dips they are patient if a little single-minded.

Likes: Hodling, The Moon, Lambos, Going all in

Dislikes: Sellers, Dips, FOMO, FUD, 10,000 BTC Pizzas

Weakness: Cognitive Bias, Inflexibility

Now although these are caricature archetypes we all have aspects of these mindsets (more or less than we would like to admit) when it comes to our individual market approach.

Understanding your choices, learning from your experiences and making a plan and sticking to it will help give you clarity in the crypto markets.