OUR CRYPTOCURRENCY PORTFOLIO IS SUBJECT TO GREAT RISK

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Sometimes we do view things like inflation, large banks, or the Federal Reserve as the biggest risks to our portfolio, but it is untrue because when it comes to investing, we are our own worst enemy. I'll be discussing investor bias and how to comprehend the mental processes at work. Confirmation bias, which is when we try to accept new information that supports what we already know, is the first one I'll discuss. We prefer to see the world in our own reality rather than how it actually is, which simply means that this validation makes us feel good.

A chart is a fantastic illustration since it can provide us the information we want to know, and this is an area where the market is bullish. Charts that contradict what we are seeing can be ignored. Finding accounts that contradict your beliefs and learning from them even when you disagree with them is one method to combat this. You can always be right, so you should demonstrate that it is acceptable to occasionally be wrong.

Another issue is loss aversion, which arises from the fact that people are risk-averse. Simply put, this means that as people, we prioritize avoiding defeat over devising strategies for triumph. Because money can be a very emotive item, the agony of losing is greater than the joy of winning. Your portfolio's emotions come through in panic sales during market declines or in holding onto a lost position longer than anticipated. Setting a target when investing in any crypto asset is an excellent strategy to reduce the impact of the bias.

Another bias is availability bias, which is when we evaluate something based on the information that is currently available about it. Our minds currently confuse immediateness with importance, which causes us to place an excessive priority on recent information when making decisions. For instance, if we check the news, it constantly bombards us with breaking news and negative headlines. Studying data and using it to determine the likelihood of an event occurring is an excellent method to outwit it. A long-term perspective is beneficial since it can help you comprehend the cryptocurrency market cycle.

It is exceedingly difficult to understand the gambler fallacy, which is when we believe that previous experiences genuinely affect future possibilities. History does repeat, but not always, so we can counter that it does not. Instead of relying solely on your own abilities to make selections, you should obtain comparable facts.

The herd mentality is another significant issue; we are all guilty of it since it occurs when we follow the crowd. When the market is bullish, for instance, many investors may want to enter the market even though it is already much higher than predicted. Some people could believe that since everyone is holding this coin, they should invest in it just as the bubble was ready to collapse. You missed the opportunity we currently have, but there are still plenty more opportunities to come. Other factors to think about with optimism and pessimism bias include times when the market has increased by 10 times and investors are still optimistic about the future and holding onto their positions, only for the market to fall. Pessimism bias, on the other hand, is when you believe the market has hit rock bottom only for it to fall even deeper.