Have you ever been in a situation where you decided to visit your favourite uncle in a city, so you decide to pay him a surprise visit. Coincidentally on getting to his city you get a text from your mum that your uncle has left the city to go on vacation. But you are already half way there, you feel going back home will be a waste of your effort, time and money coming to the city, so you decide to complete the journey and probably visit your old friend who stays there or, you decide to find a chill fun place to go to and catch some fun because you don’t want to waste the journey you already started even though you know what the outcome will be.
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The same applies with investment and trading, most of us do this when investing and trading. For instance you bought an asset at $4 but the price value of the asset starts sinking below $4 but because you don’t want to see your lost investment, you start buying more of the asset, this is where we start hearing the “buy the dip” noise. The price is sinking but we keep buying more because we want to feel better and we are hoping that the value gets higher, this can be of a great advantage and at the same time can be your worst enemy. As investors, it’s hard to balance sunk cost fallacy, because we always look for a way to convert our lemons to lemonade. Hence the buy the dip noise we always make.
In your crypto journey I feel sunk cost fallacy is almost inevitable, its always considered a wise decision only when the outcome becomes fruitful, but when the outcome goes south and turns out bad, then it will be regarded a stupid unwise greedy decision. Can you really control or avoid sunk cost fallacy? Well, in my own words the best way to control sunk cost fallacy is to invest what you can afford to lose.