Cryptocurrency altcoins and (FOLO) Fear of losing out.
The driving force behind the cryptocurrency movement at the moment.
For the last plus/minus 10 day's there has been some major shifts in the Aaltcoin markets. With certain coins falling in price up to 70% in a 24 hour period. This can be explained by many factors but the 2 major ones has to be:
- People driven by the fear of losing out (FOLO) that ends up gambling rather than investing.
- The major increase in the price of bitcoin.
People driven by the fear of losing out (FOLO) that ends up gambling rather than investing.
Driven by FOLO. The field of Social Psychology has shown thru research that humans have a natural fear of losing out or being in the out group. This fear together with our natural lazyness has aloud for the cryptocurrency market to become filled with a lot of people believing that they will become billionaires overnight. In theory this idea sounds awesome, you hear story's every day of people that bought in to Bitcoin at $3 and made insane amounts of money. We all would like to have made millions this way, but sadly that is not the world we live in.
The latest crazyness in the Altcoin market can be attributed to factors such as simply more and more people finding out about the existence of these markets every day. This along with people fearing that by not being part of it they are loosing money. Leads to people throwing money at any coin that showed an increase in price of anything above 15% in a 24 hour period. This leads to the growth in price to increase which attracts even more people to buy in. This is what is called a Hypbubble (or the technical term "short periods of arousal driven hypercombolation").
These hypbubbles usually take place with coins that have no real substance or worth, where the product cannot sustain its worth in the market. Hence, we see that there is usually a sharp fall in the price of these coins after a short period of time. This happens when the rate of growth slows down and the drivers of the bubble get bored or scared.
The major increase in the price of bitcoin.
There is a clear and observable trend in the times that bitcoin prices rise dramatically. We can see that in these times the altcoin growth rates usually will fall to minuses. A possible explanation for this is people seeing Bitcoin to be a more stable investment and pulling away from the altcoin market to try and "ride the waves of the Bitcoin exchange". This mass pulling out of the altcoin market leaves the coins that might not necessarily be such stable investments to suffer grate losses in price.
Bitcoin still carry's the biggest share of name recognition in the cryptocurrency market. and it is the nature of people to rather trust that which is known over the unknown. Hence, in time this trend should subside and the market should stabilize.
In Conclusion, we can see that a lot of the price fluctuations that happens these days is attributed to people simply jumping on the bandwagon and not 'investing' in coins. And as a result these coins will never be used for the purpose there creators intended it to be used for. Ass well as the bitcoin market that is not very stable at the moment.
Thank you for explaining this effect in great detail. I still have a ton of Hodl coin from last year and was waiting for it to be worth about 250 satoshi, it was slowly climbing there. And all of a sudden the price just plummeted to something like 50% of the day before. And I could not find anything that was "wrong with it". Oh well, have to wait it out...
So much of it is sentiment. I think, anecdotally, the idea that one can invest $1000 without even getting a single bitcoin, is driving them to look into alts instead.
Some in the community are pushing to speak in millibits, which are 1/1000 of a bitcoin. Buying millibits for $3 or $4 each sounds a little more palatable.
I totally agree. There needs to be a change that will psychologically allow people to buy in. Sort of like when a stock splits in order to make it more attractive to average Joe investors. I suppose they already do this when talking 'satoshis', but they are just a one hundred millionth of a single bitcoin which is a bit small (for now).
I think that "millibits" is a very good plan. Especially for getting people in developing nations involved and active in the cryptospace. In country's where the local currency's and exchange rates puts the price of 1 bitcoin in ten's or hundred's of thousand. The shear amount scars people of and the fact that you don't have to buy a whole bitcoin is also not so well understood.
I have made some good profits with the coins I truly believe in, still owning a good amount of that for HODL. I took a small percentage of my profits and been placing that 'play money' into some alts I think have potential.
I think were still at the beginning of something big here, there are still alts that will be really big in the future.
i did read your article and I think it is well thought. Upvote and follow for you!
Great article. I think you brought up some great points. One of the reasons "certain coins falling in price up to 70% in a 24 hour period." is because of organized "pump and dump" groups who pump up a coin to increase its value so they can dump the coin at a higher price, essentially artificially inflating the coin. It's an illegal practice because it's the same thing as insider trading...and it happens every day in the crypto world unfortunately.
,wow fantastic good explation never seen before