I want to talk extensively about people's attempts to predict price and the psychology of the 'crowd'. This is the first part of my thoughts that I tried to summarize. Conclusions on how to act in the face of enormous (!) complexity in analyzing contradictory information will be in other articles on this subject.
So, you decided to analyze some project.
What awaits you:
1. The impossibility of predicting market behavior: Crypto markets are extremely volatile, manipulative, and traditional analysis methods such as technical or fundamental analysis are not always applicable due to high risks, opacity, and uncertainty.
Get used to the idea that any, even the most justified opinion, is just a small piece of reality. At best.
2. The problem of evaluating the project team: It is difficult to objectively assess the competencies and motivations of the developers of a crypto project, especially when transparent data about the team is lacking and anonymity is the norm.
As an ordinary investor, not being a specialist, you do not have access to the narratives and issues that are actually important in the fields of IT, fintech, and cryptocurrencies. Never forget that.
3. Problems with regulation and legal uncertainty: Cryptocurrencies are regulated differently in different countries, creating additional complexity when analyzing projects in terms of their legal stability and long-term viability.
Moreover, regulation largely depends on changes in government, which happen often and unpredictably. Not to mention such a normal phenomenon in politics as the variability of opinions.
4. The difficulty of assessing technology and innovations: Technological innovations in the crypto space are rapidly evolving, and a deep understanding of complex concepts such as blockchain, smart contracts, consensus algorithms, etc., is required for thorough analysis.
In modern conditions, an ordinary person will not have enough life to fully grasp at least one area.
5. Market manipulation and fake projects: Some crypto projects may be created for the purpose of price manipulation (pump-and-dump), making analysis difficult, especially for newcomers who may not recognize the signs of fraud.
All successful fraudulent schemes, at the peak of their existence, looked to their victims like the most attractive investment idea.
6. The psychology of investors and the crowd: Emotional reactions and crowd behavior play an important role in the crypto market, making objective analysis difficult, as prices often depend on panic or euphoria rather than objective factors.
A member of the crowd tends to separate themselves from the crowd.
7. Uncertainty in future regulation and development: Investors cannot accurately predict how the legal framework will change in different countries, which can significantly affect the viability of crypto projects in the future.
Even if you have successfully analyzed something, ask yourself: how long will your analysis be relevant?
To be continued...