Emotions, Market Dynamics, and the Dangers of Hype Media
Chances are, the first time you heard about blockchain technology was when some strangers on social media boasted proudly about turning their meaningless net worth into millions of dollars overnight, and that you can do this too. Can you though?
Well, you can get lucky, of course. Building your financial future on such an unstable bedrock of a foundation would be borderline insane, though. That said, you can conduct all the research you want, learn all about technical analysis, learn everything there is to know about market cycles and macro-economic factors, and still hesitate at the wrong moment to place that buy order on the exchange and miss a great entry. In the end, fortune does favour the bold. There is a certain risk and reward ratio that cannot be denied, but yodelling your hard-earned salary into the next best meme token is certainly not a winning strategy. The first thing we need to understand is that knowledge, patience, and strategy are the most important keys to building wealth successfully. Dumb luck, on the other hand, is merely a by-product that gets blown out of proportion by the media because it will trigger your emotions, leading you to make impulsive decisions. Therefore, it’s important to regularly take a moment to breathe and reflect on your wealth-building strategy and how you are perceiving and digesting current events.
Market Dynamics and Headlines
Whether you’re a newcomer or a veteran in trading, investing, or project funding, you have the capacity to look at a graph and identify patterns. Truly understanding them is an art and not always necessary. Of course, if you are a trader, especially on small time-frames, it makes sense to understand past price swings, identify seasonality, factor in macro-economic factors (such as political and socio-economic events), and learn about charting tools that may help you understand graphics better. Past events can help estimate evolution. Even though a price might not be predictable, humans tend to be very predictable. Our emotions have a deep-rooted genetic purpose to protect us from falling victim to a nearby predator. Today, we have mostly rid ourselves of the daily worries that a lion, wolf, or snake will sneak up on us, but our genetic material has not caught up to this. The media knows this, and social media is catching on. You really cannot blame journalists, influencers, and even politicians for playing these cards to earn a pay check. You can blame yourself for turning a blind eye and not talking about it. We know that hype media is nothing but a scam, yet it manages to prevail and grow stronger until the bubble bursts again. You can observe it within the crypto industry very well. The Bitcoin four-year cycles include a media hype cycle, and even though one could assume that after 15 years the masses have caught on to it, you can be sure that this is not true.
This will be the last major Bitcoin cycle is by far the most outlandish statement someone can make, but it sounds sexy to the average retail investor. Especially after missing out on 2021, when the media attention thanks to Elon Musk became sensational, many will rush into the market this time believing the headline is true. But markets are not like that. Of course, bigger markets see fewer fluctuations, but even the stock market and our global economy move in continuous cycles. The key is not being lucky that one time, but being consistent and choosing the right timings for the right strategic moves. You can have holding periods, accumulation phases, observation moments, and selling opportunities spread out and repeating. There is no rule to abide by, but there is logic to apply.
If there was one rule, then it should be to never let emotions dictate decisions. You will only hurt yourself.
The psychological component to investing is crucial. We must confront ourselves with the reality that we are creatures that rely on emotions triggered by external stimuli. We cannot deny our genetics, and we shouldn’t fight them either. The key is to learn about ourselves, the triggers that seem to control us, and how we can manage them in different situations. Who knew that putting money into a stock, cryptocurrency, or your local start-up concept would have these kinds of strings attached, right? Life is complex.
We Seek Advice to Build Confidence
Making decisions is difficult. To alleviate the burden of choosing wrongly, we tend to orient ourselves among peers: social groups, community forums, and, more often than we should, social media influencers who share our spectrum of interest. We call this “doing research.” However, at face value, this is merely a desire to collect opinions that either share or contradict our personal feelings.
You can sit here and tell yourself that this is how it works, but it really shouldn’t. Free speech and having opinions are great, but for you to make a decision, you’ll simply need bare facts that have no subjective notion to influence you. The weight you put on specific findings and insights about a topic will always be different from others. While an investment opportunity might be great for someone, it may not be suitable for your current situation. The risk-reward ratio has to include personal health, financial strength, family dependencies, and many more factors that define a decision-making process. Nobody on social media (even mainstream media) should have that kind of power over you. However, that is the trick with hype media: manipulating the psychological component within our brains to trigger emotions that lead us to make impulsive decisions based on feelings and not facts. Learning to stand above these triggers is probably one of the most important things we can learn in our lives. Everything else is almost second nature because you can be (and might have experienced this before) the best-prepared investor, with an amazing entry and exit strategy, well-defined targets, and you are even aware of the emotional component market swings and media headlines bring to the table. Yet, when push comes to shove, the storm is coming, your favourite social media influencers and news anchors begin reading their headlines late afternoon, you are ready to pull the trigger and sell at a loss, only to see the market turn around three days later as you had expected. Now you’re looking with little emotion into your half-empty bottle of beer, but now it’s too late to suppress your feelings. Shed that tear; it’s alright. We’ve all been there, and we will all be there again because mastering your inner demons is not a one-time mission. It’s a job.
How to Train your Demons?
Of course, it’s easy to sit here and tell you that controlling your emotions is the key. It’s probably just one of many components to success. There are plenty of things we can do to grow and become better, and we can do this every day. For example, routines are important. Good sleep, waking up early, doing physical exercise, and eating healthy are good practices for life in general. But since they lead to a fresh and active mind, they are crucial habits to foster, especially for someone who would like to become financially free. Your research will depend on a sharp mind, and good habits usually lead to less spending, which in turn could free up more budget for investments. If you play your cards right, this can easily become an upward spiral to infinity and beyond.
Furthermore, if you haven’t done this yet, you could also start paying attention to media headlines, YouTube titles, and social media post patterns. You will quickly find that hyperbolic language is used by most professional and amateur content creators to catch your attention. We are certainly not in a bear market anymore, and if you look around, words such as rally, explosive, skyrocket, boom, surge, or revolutionary will be in your everyday vocabulary now. On the other hand, when markets were not doing well, or if a price correction occurs, terms such as panic, meltdown, plummet, collapse are very likely buzzing around your head to scare you. Language is the strongest tool humans have to manipulate behaviour and emotions. This is true for financial markets, as it is for politics, relationships, and any other topic we converse about with other people. This does not mean language is bad; of course, it is not. We need every word to communicate appropriately in the right situation. The situation is the main driver here. Hyperbolic expressions have their purpose, but it is important to understand when the media is trying to manipulate you and when they are actually trying to share something important with urgency. To put this in perspective, if you see a house where the roof is on fire, but a woman is calmly feeding her child two floors below, you’ll want to move heaven and earth to get their attention. However, if the neighbour is burning some branches in the backyard, you might want to hold off before evacuating the entire neighbourhood.
A Conclusion to Avoid Illusion
There is so much we can do as individuals to protect ourselves from manipulation. However, with the growing number of media outlets, an increasing array of tech devices at our fingertips, and growing dissatisfaction around the world, it becomes very easy to get overwhelmed. Achieving your goals is not always easy with all the noise around you. Hype media helps nobody except those who create it. The innocent attempt to learn and research gets exploited if we don’t pay attention. A good person turns bitter, and the world sees another light go out. It shouldn’t happen, but it does. Hopefully, this article sheds light on the dangers out there because all it takes is self-awareness to take the first step in the right direction. The second step is taking a break when things become too much. Sometimes, that is the hardest but most effective trick. Walk away from everything, breathe in some fresh air, and do not think about daily life. I would give that advice to anybody who asks, but especially within the crypto industry, taking a moment to look away and create the head space you need is the best advice to think clearly again. Your goals will thank you later.
Always keep in mind, nobody is perfect. Understanding and judging situations correctly takes time, experiences, and conquered mistakes. We have all been there, we will probably all be there again at some point, but if we are serious about our goals, we will prevail.
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