Have you ever lost your cool trading the highs and lows of the crypto market? You are not alone. Money can be an emotional matter for many people, and the wild swings of the market's ups and downs can provoke both fear and excitement in all of us.
And while our emotions do have a time and place, like at a wedding or a funeral for example, they interfere with our rational thinking abilities, and lead to poor trading and investment decisions.
In this article, we're going to cover how to keep our emotions under control, and avoid a phenomenon known as "bag bias".
Without further ado, here are three ways to remain level-headed in crypto, and make better financial decisions:
Avoid trading entirely, and become an investor instead. Think of crypto as a long-term investment, similar to how you would view an RRSP or a 401k. Invest into solid projects, and wait patiently for them to be adopted by society, or bear fruit.
Focus on market research during the "boring" times, when people are neither buying nor selling. This way, you will be able to think with a clear head, and avoid the stress of doing analysis during a bull run or a steep correction.
If at anytime you are starting to feel agitated on your crypto adventure, step away from your computer or smartphone and just chill for a bit. Go for a walk, meditate, or "touch grass" as they say. The worst thing you could do is make an important financial decision under stress.
Bag Bias
Another psychological phenomenon found in the crypto space that's crucial to be aware of is called "bag bias". Essentially it means that you will favor the projects that you have already invested in, and strongly oppose those that come along afterwards to compete with them.
For example, we know that a lot of Bitcoin maxis are not a fan of Ethereum, and the Ethereum maxis are not happy with the likes of Binance Chain, Cosmos, Polkadot, etc. Even though all of these projects offer innovations atop their predecessors, they threaten the overall value of our portfolios, and therefore evoke negative emotions.
How to Avoid Bag Biases?
The first step is to acknowledge the phenomenon exists, and that you are likely suffering from it. Bag biases tap into our deep-rooted tribal nature, which desires to see our team win and the other team lose. Zoom out, and recognize that multiple winners can come out of this incredibly competitive space.
You should diversify your portfolio into a variety of solid projects. No, I'm not referring to meme coins, which are 99% gambling and no long-term vision.
There are a few innovative blockchain projects that have been hard at work throughout multiple bear/bull cycles. The ones that innovate and form strong communities over many years are often worth diversifying into. By the way, you can check out this article for tips on how to distinguish the good blockchain projects from the bad ones.
At the end of the day, it's important to keep our emotions under control if we want to succeed financially long-term. Recognizing our tendency to overvalue the projects we already own allows us to remain open-minded to new innovations.
If you enjoyed this article, be sure to check out my other posts on crypto and finance here on the HIVE blockchain. You can also follow me on InLeo for more frequent updates.
Until next time...
Resources
Image Of Stressed Out Trader [1]
Image Of Tribal Warfare by Venice AI [2]