Bagholders

Mostly because there are a lot of words that are not typically used, people who are new to the crypto world may face a little difficulty getting on with the terms of the market. In addition to that, for the stock market and the crypto market, there are also different terms that are related.

One of those words is bag holder. What bag holder effectively means is a person who has invested in some asset and holds a security position until the value of inestment drops to zero. If an investor continues to keep the coins stubbornly even though he/she can sense the collapse and simply wait before the coin/token goes useless, he/she will be called a bagholder.

Bag holders: where did it start?

This word certainly did not come from nowhere, but was developed back in the times of the Great Depression instead. People used to be on soup lines carrying potato bags filled with whatever little possessions were left with them during those days. These individuals were called bag holders, and the term has now appeared in the modern lexicon of finance and is commonly used in the markets.

Why people become bag holders

A bagholder, as already mentioned, is someone who holds on to his investments until they are worthless. There may be different explanations for this, but one of the most common reasons is the lack of understanding of the stock's declining value. Investors could hold underperforming securities without even understanding that the securities are actually underperforming. In the past, this unawareness has caused a lot of losses to a lot of investors and it is unavoidable until a person always goes completely with trend and very often checks the values.

Many investors still suspect that an initially bad investment decision would be remembered by selling assets that are diminishing in value and that is what they don't want.

There is also a phenomenon that is called the influence of disposition. This relies entirely on human psychology. What actually happens is that many investors prefer to sell price-increasing crypto-currency coins while stubbornly retaining the crypto-currency coins whose prices are dropping. The thing about human psychology is that they hate to lose more than they want to succeed, which is what pushes investors to make those choices.

Obviously, the most profitable thing one can do after an investment is to monitor the human institutions and go according to market trends. The principle of opportunities also comes into play, which suggests that people determine rather than perceived losses according to the perceived benefits. A individual would prefer to only take $50 rather than take $100 and then lose $50.

Sunk cost fallacy

The sunk cost fallacy is a huge deal that also has the power to create a bagholder for an investor. Basically, the sunk cost means the unrecoverable costs that the investor has already made on the real properties (coins). These are the extra savings that an investor makes that they certainly want to get back, waiting for them to return to the original price or more before the price of the coins slingshots. An investor should certainly regard the additional investments as sunken costs in such times and should begin to consider them permanent, so that they can take better steps ahead.

The unrealized loss is not something all investors want to suffer without understanding that the inevitable will merely be postponed by hanging on. In such cases, a financial advisor is very necessary in order to give you the right advice and save the maximum possible amount of your money.