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Market psychology and its impact on Ethereum (ETH) prices
In recent years, the world of cryptocurrency has increased market volatility, many investors who buy the idea that new cryptocurrencies will overcome existing ones. An aspect of this trend is market psychology, which refers to the study of how emotions influence investors’ behavior. In this article, we will explore the concept of market psychology and its impact on ETHREUM (ETH) prices.
What is market psychology?
Market psychology is an area of study that examines how investors make decisions according to their emotional state, rather than the rational analysis of the technical or fundamental properties of a cryptocurrency. This approach recognizes that emotions play an important role in investor behavior and can lead to irrational decisions when it comes to investments in cryptocurrency.
The role of emotional triggers
Emotional triggers are events or experiences that cause strong emotional reactions from investors. In the context of market psychology, these triggers can include fear, greed, emotion and despair. For example:
- Fear: Investors may be afraid to disappear (FOMO) on a potential tendency in cryptocurrency, which causes them to buy at high prices.
- Greed: On the other hand, investors can experience excessive optimism or euphoria when they notice a new promising cryptocurrency, which increases their price.
- Excitation: The emotion of discovering a new technology or an innovative application can lead to a quick purchase and sale activity.
- Offer: Instead, investors can become discouraged if the price of a cryptocurrency decreases, which causes them to sell their assets.
Impact on Ethereum (ETH) prices
Ethereum (ETH), the second largest cryptocurrency by market capitalization after Bitcoin, has always been motivated by technical and fundamental factors. However, market psychology plays an important role in the formation of its prices.
* Fear and greed
: The constant appearance of the new cases of use for the intelligent contractual platform Ethereum has led to periods of rapid price volatility. Investors have often joined the idea that ETH will become more precious, because it will become more adopted.
* Speculation : While investors try to take advantage of potential increases in future prices, they can adhere to ETH at lower prices, to sell when prices increase due to speculation, rather than fundamental value.
effect on market feeling
Market feeling is a crucial aspect of market psychology. When the general feeling of the market becomes negative, it can decrease prices in Ethereum (ETH). In contrast, when investors are optimistic about future ETH prospects, they can become more willing to buy at higher prices.
* Price rise : An increase in ETH demand has led to an increase in prices, which in turn contributed to market optimism and to increased investors.
* Sales pressure : Instead, a price drop can cause sales pressure, as investors try to download their assets and reduce their exposure to potential losses.
Case study: Ethereum (ETH) Square psychology
To illustrate the impact of market psychology on ETH prices, examine an example of recent history. In October 2017, ETH reached the high price of $ 1,400, to drive over 80% due to a speculative bubble.
* Fear and greed : The sudden collapse of the price was partially motivated by fear and greed. Investors who have joined the idea that ETH will become more precious when they have obtained traditional adoption were suddenly forced to sell when prices have dropped.
* Increasing price : Despite this decrease, investors have continued to buy prices at lower prices, which leads to a price return. This purchase pressure has contributed to the support of the ETH price and to maintain the market feeling.
