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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.

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