What is loss aversion and its relationship to Bitcoin markets?
- Good heavens! I didn't sell at 60 and now it's at 40g!
- But you bought at 20, you still earn... why don't you sell)?
- I should have sold at 60, I'm going to wait for it to rise again
Have you been through this?
That has a name: loss aversion.
The concept was developed by psychologist and Nobel Prize winner in Economics Daniel Kahneman (yes, a psychologist won an economics prize).
Considered the father of behavioral economics, Kahneman describes this sentiment as a tendency for people to value losses more significantly than equivalent gains.
This psychological phenomenon is often intensified in volatile Bitcoin markets, where fluctuations are commonplace.
Even if the position is still profitable, loss aversion can lead to feelings of distress when prices fall, even if you are still in profit. Anxiety over not having sold at the peak becomes an emotional dance that reflects the complex relationship between our emotions and digital finances.
Understanding and managing loss aversion is essential in the cryptocurrency game. Since, in this world of high volatility, balancing rational decision-making with emotions can make the difference between a successful investment and the feeling of having missed a unique opportunity.
