Log In / Register

Cryptocurrency: 5 Tips to Avoid Herd Instinct

Making productive strides in crypto assets requires overcoming the herd instinct. The inability to do so is the primary reason most investors fail and exit the market space.

Amid the Fear Of Missing Out and volatility, there are some exchanges or platforms, such as Libertex, that provide sufficient resources to rely on when investing, such as being commission-free, And that helps in beating the herd instinct.

So, from the standpoint of investing, let us look at herd instinct. It is the tendency of people to behave or act in the same way as the rest of the people in the group or market, also known as mob mentality. Fear and greed, two emotions that constantly compete for market dominance, frequently cause herd mentality in the market. Fear induces panic, which increases supply, whereas greed causes exuberance, which increases market demand.

Our brains are hardwired to follow herd instincts, which is a problem. Seeing the value of our investments fall causes anxiety and fear in our minds, which leads to panic selling. Similarly, as the value of the crypto assets we do not own rises, so does the greed factor. And we may feel compelled to buy them at exorbitant prices if we believe the upward trend will continue.

We all have feelings of fear and greed, and these emotions are the worst enemy of investors. It is, therefore, necessary to keep them in check, and we are here to assist you in doing so. Instead of succumbing to the herd instinct, we recommend the five investment strategies listed below to help you develop a distinct investor identity for yourself.

1. Do Your Own Research

Doing Your Own Research (DYOR) is the first step in developing an opinion about market movement and making an informed decision. Take your time making decisions, questioning your assumptions, and understanding the impact(s) of your choices.

Before taking any action, you should first understand why the market is falling and what is causing it. Is it the result of a fundamental shift or a normal market cycle?

You will be tempted to join the herd due to fear and greed factors. However, you must maintain your focus on your long-term investment objectives.

2. Follow successful investors

Whether it is life or investment, it’s a well-known fact that our social circle impacts our thinking ability and behavior. Who we choose to follow shapes our thought patterns and, as a result, our proneness to succumbing to the herd instinct.

Following successful investors or crypto influencers and understanding their investing style can help a lot in the investment journey. Successful investors’ market views are frequently shaped by their long-term exposure to multiple market cycles. If they’re any good, it’s because they learned from their mistakes. Identifying and acting on the advice of such investors will help you become a better investor, allowing you to outperform your peers over time.

3. Track previous trends

In the long run, the market is ruled by fundamentals. Whatever the short-term trend in the market may be, assets with strong fundamentals become wealth creators for investors in the long term. Looking at past market trends will reveal similar trends (to gain insights from) and reward fundamentally strong investment assets.

The past market trends are available all over the internet, and you just have to type in the right keywords.

4. Diversify your investment

In layman’s terms, diversifying your investment portfolio means putting your eggs in different baskets. Diversification of investment helps to spread risks and maximize long-term returns. During market fluctuations, each investment performs differently and smoothes the return, which is important.

Diversification also has the following benefits: it makes your portfolio more shock-proof, it improves market cycle management, it improves risk-adjusted returns, and it leverages growth in other crypto assets.

5. Avoid checking your investment frequently

While it is important to keep track of your investment portfolio, checking it too frequently is not advisable either. In fact, by constantly checking your portfolio status, you increase your chances of becoming sensitive to losses and gains, which triggers the emotions of fear and greed. It may also cause you to make poor and rash decisions.

his phenomenon is also known as “myopic loss aversion”.

In Conclusion

Investment of any kind is not for the faint heart. It is critical to keep your emotional composure in the market. 

Market volatility should be viewed as an ally rather than an adversary. After all, market crashes and corrections aid in eliminating weak links and restoring market stability and resilience.

We have provided the information available on this website for your general guidance. We take great care in ensuring that the information is accurate; however, we accept no liability in this respect. You should be aware that the content is subject to change without notice.

The services offered on this website are only available following successful completion of our account opening requirements. We have made every effort to describe the benefits and risks associated with these services which you should ensure you understand before contemplating an application.

You acknowledge and agree that any instruction given by you or on your behalf via our website is made at your own risk. You will be responsible for keeping your account number and password confidential and acknowledge that we shall be entitled to rely upon these details to identify you.

From time to time, our website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

Capfins.com is a website owned and operated by Vertex Finance LTD (“the Company”) with a registration number 2023-00125.

Vertex Finance Ltd. is owned and regulated by Archway Financial Ltd. Archway Financial LTD is licensed in Mwali as International Brokerage & Clearing House with license number T 2023266

Collect & Pay is the Wires Payment Provider for Vertex Finance LTD.

Virtual Pay is the Card Payment Services Provider for Vertex Finance LTD.

The information on this site is not directed at residents of the United States, Belgium, Australia, Canada, Israel, New Zealand, China Japan, Iran, North Korea, Thailand, Officially the Democratic People’s Republic of Korea or any particular country outside the EEA and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

HIGH RISK INVESTMENT WARNING: Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 64% of retail investors accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.