People love making money, but they hate losing it twice as much
What Does Famous Economist Thaler's Research Say About Investors at Loss (How Can We Benefit)?
1️⃣ VALUE THEORY
Investors who are at a loss take irrational risks to save the cost!
When it comes to behavioral economics theory, the first thing that comes to mind is Thaler. The theory of value that Thaler talks about in this book is actually simple.
We are happy when we gain and unhappy when we lose. This is already normal. However, there is a disproportion between these two feelings. The S-curve in the image below shows us this very clearly.
So what do investors who are more upset about losses do?
2️⃣ GAMBLING TO COMPENSATE LOSS
The answers given by the people who participated in the research are really interesting.
The result of the research is this:
1- If you win $30, you take a risk to earn another $9 with a 50% chance
2- If you lose $30, you don't want to take risks with a 50% chance of making another $9
3- If you lose $30, you risk winning $30 with a 33% chance (Thaler calls this gambling) (THARE IS THE MOST IMPORTANT)
➡️ So:
For example, we bought 1 Bitcoin at 40K. Currently 30K. So we have a loss of 10K. We take irrational risk to offset that 10K loss.
Otherwise, if the Bitcoin we bought from 40K rises to 50K, we act safer to earn 10K again. In fact, the return is the same.
Stay tuned for all the developments!
@Kripto Köşkü 💚
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