The Psychological Trap Of The Zero To Hero Bull Market Dynamic
Unfamiliar Surroundings
For those who are new to Crypto, as well as to those who find themselves in doubt as to whether the bull market will ever return. It’s important to not only gain and have experience, but also to ensure that your perspective and understanding are in touch with the market you are now exposed to. Typical market dynamics operate in such a way as to intensify fear and stimulate greed. These dynamics are inherent to all markets.
When you begin to consider the tremendous volatility that takes place in the Crypto market, especially regarding altcoins, it becomes abundantly clear how this dynamic works to manipulate the emotions and decisions of market participants. By the time investors and potential investors are able to break free from its spell, it’s too late. Something that very few people can realize and appreciate regarding financial markets is the psychological aspect.
This is why so many new investors are gradually worn down and expelled from the Crypto space. They are unable to realize and appreciate the “cost” of the journey. For the majority, it is not even considered a journey, but rather a quick payday, when in fact it is one of the most emotionally demanding endeavors any individual can ever embark on. I say this because if you are not psychologically prepared, you will be emotionally overpowered.
The extremities of the bull and bear dynamic work to emotionally break investors. Essentially, this is what happens. Look at everyone who leaves Crypto during a bear market. What are the reasons? Disappointment, despondency, and disillusionment are usually the common culprits. This reveals two very obvious issues. Firstly, there is an unrealistic expectation that has now been shattered. For many, this alone is enough to throw in the towel.
The second is that of psychological weakness. Psychological strength is the most advantageous virtue to acquire and exercise when dealing with financial markets. If you can master your emotions and make decisions based on logic, data, and extrapolation, you will have an enormous upper hand on the majority of market participants. This is why knowledge alone is to a large extent impotent when it is void of discipline.
Some investors are actually able to make the correct decisions in theory, but when faced with a real-life scenario give way to their emotions, and so shipwreck their efforts. When you consider this, the following question becomes rather pertinent:
What is the point of knowledge, and even skill, if it cannot be applied?
A successful investor or trader is by default disciplined and emotionally well-grounded. For the simple reason that without these attributes it is impossible to execute the appropriate behavior at the appropriate time. Being hot-headed, and overzealous will get you REKT. Patience, discipline, and well-executed strategies are what are required if you are looking to profitably exit a position or trade.
Extremities Of The Spectrum
Whether it be the bottom or top end of the spectrum, the psychological intensity of these zones in the market is what breaks investors. At the bottom end, many investors are incapable of seeing a positive outcome, let alone a bullish scenario. The flipside of the coin causes ill-prepared investors to only envision a bullish outcome, and to completely ignore and disregard the possibility of a correction.
Regardless of whether you are on the ground floor or the top floor, if you are not psychologically prepared you will default into self-destructive behavior, and either miss out on being well-positioned for a bull market scenario… or, get trapped at the top. In either scenario, you will find yourself on the wrong side of the market. This trap continues to defeat well-meaning, yet ill-prepared investors.
The preparation, in this case, has little to do with the financial aspect. It is rather a psychological preparation, and one that many believe is unnecessary, which is why, many of my warnings fall on deaf ears. When I moved almost half of my holdings into stablecoin allocations in 2021 I announced it and made it public knowledge. Many months before the bottom in 2022, I did likewise.
I disclosed the commencement of opening short positions, as well as a possible bottom at $13K to $18K. This opinion was however scoffed at by many. However, hindsight assigns honor, not the opinions of others. Everyone has an opinion. However, not everyone’s opinion is correct, and that’s what sets opinions apart. Some opinions mature into accurate predictions, while others will eventually become embarrassingly incorrect.
That being said, a mature person can learn more from being incorrect. However, a stubborn individual will unfortunately repeat the same mistakes next time around. In many cases, whales are OGs. Once you have experienced something several times, chances are, you have woken up. New investors, in many cases, find little value in taking into consideration the warnings of the experienced.
Experience is inherently connected to time. There is no such thing as experience divorced from time. If you are experienced at anything, you have spent thousands of hours gaining that experience. Unfortunately, zeal and over-inflated egos are unable to acknowledge external input, and so sadly, seldom learn and often exit the market. These are the realities that some are unwilling to accept.
Final Thoughts
The market is designed to impoverish the foolish, while simultaneously rewarding the patient and disciplined investor. Patience is a mighty warrior. Many investors who have acknowledged to themselves and others that they lack the technical and psychological skills, have been victorious by simply applying patience. I like to examine my behavior and practices of every cycle, and then look to improve upon them next time around.
This is how I have managed to remain on the right side of the market. The moment I become unteachable or refuse to consider all possibilities is the moment I initiate failure. Self-examination is important and plays an enormous role in developing and honing one’s skills. Hopefully, this cycle will see many investors breaking the bad habits that have limited their investment successes. All the best! See you next time!
Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.
