Hello to my friends who love life and keep smiling despite all negativity. In this article, I will talk to you about "ANCHORING", which is a term that you do not hear much in the cryptocurrency markets. I will try to explain it as simply as possible. Let's learn together…
Just as a house should be built on a solid foundation, our ideas and opinions should be based on accurate facts on the subject. Unfortunately, this is not always the case. The concept of anchoring refers to the tendency to base our thoughts on a point of reference. In other words, we make our decision based on an event that we experienced on time. This can lead us to make the wrong decision about the financial situation we are in.
Anchoring theory might make sense. However, it appears to have an even more widespread effect in many situations, and especially where people deal with concepts that are new. For example, you are viewing a new cryptocurrency. The initial price of the cryptocurrency in the market is $ 5 but then it will drop to $ 1. When you look at the chart, we think that it will be anchored to $ 5 when evaluating the price of that cryptocurrency since you see it drop from $ 5.
Let's come to the effect of cryptocurrency markets;
Cryptocurrency is also frequently encountered in the markets. Investors sometimes base their decisions on unrelated figures and statistics from real values. For example, some investors invest in cryptocurrency that has dropped a lot in a short time. These investors anchor for cryptocurrency at a recent high point, possibly thinking that the drop in price is an opportunity to buy cryptocurrency cheaply. (As in the example we gave before, it looks at the graph, the cryptocurrency has dropped by 40%, now it is the opportunity to buy and they buy the cryptocurrency.)
While it is true that the overall market could cause some cryptocurrencies to drop significantly in value, there has probably been a change in an exchange that is losing value in this way, which makes it possible for investors to take advantage of short-term volatility.
For example, imagine that the XXX coin has risen significantly from last year and its price has increased from $ 5 to $ 100. In recent weeks, it has been announced that the system of XXX tokens has been hacked and the system will not work for a while. The value of the cryptocurrency has therefore dropped from $ 100 to $ 30. Investors who bought the cryptocurrency above $ 40 would think that they bought the cryptocurrency cheaply because it was anchored to the previous high of $ 100 and was priced below the value of the cryptocurrency as the problem would be solved. Actually, cryptocurrency is not worth less. Cryptocurrency decline reflects a change in basic indicators (System hacked, inoperable). Investors who believe in cryptocurrency and buy $ 40 fall victim to the anchoring phenomenon, believing that the share should cost $ 100.
In finishing…
The best way to avoid anchoring error while investing is to have a critical mindset. You should pay attention to the numbers you use to evaluate a cryptocurrency's potential. The most successful investors don't just base their decisions on one or two benchmarks. They evaluate each cryptocurrency investment environment from multiple different perspectives. (For example, they evaluate the price of the cryptocurrency with the change in its fundamental and technical indicators, not just by looking at previous figures)
As I always said, listen to everyone, decide for yourself ...
I'm looking forward to your comments. Thanks to your comments, we can shape my next articles together. Let's stay in touch… Take care of yourself so that you and the people around you are happy…
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