🚀 In an uptrend – confidence turns into excitement
When the market enters a growth cycle, optimism quickly spreads. Rising prices create a feeling of victory, activating the reward system in the brain, releasing dopamine – a neurotransmitter that creates feelings of 'euphoria' and excitement.
The phenomenon of FOMO – fear of missing out starts to appear. This is a very instinctive reaction, when the brain – especially the 'social' control centers – forces us to keep up with the crowd to avoid being left behind.
🤳 Social media: The emotion amplifier
Platforms like Twitter (X) and Reddit continuously pump news about people 'taking profits of several hundred %', increasing desire and defiance. People buy coins not because they understand the project, but simply because... 'others are getting rich too quickly.'
🐶 Meme coin: The symbol of FOMO
• Dogecoin, Shiba Inu, and most recently the meme coins named TRUMP, MELANIA – are clear examples.
• Their prices rise not based on intrinsic value, but because of community excitement and speculation spreading like a virus.
💣 Uncontrolled excitement → Bubble
Continuously stimulated excitement will lead to loss of control, creating price bubbles. When prices far exceed intrinsic values, just a small shock can be enough to reverse the market.
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📉 In a downtrend – fear dominates reason
When the market crashes, emotions shift from optimism → skepticism → fear. At this point, the amygdala in the brain – the center for processing fear – takes control, pushing investors into a state of instinctive panic.
😨 Loss aversion bias: Loss hurts more than profit
Humans often feel the pain of losing money more acutely than the joy of earning the same amount. This is called loss aversion – a form of cognitive bias that makes investors more prone to panic when the market is in the red.
💥 The stage of capitulation: Desperate sell-off
As prices fall, fear increases. When it's time to 'capitulate', investors begin to sell at any cost, accepting heavy losses to 'escape the pain'.
This cycle has repeated many times, notably during the Bitcoin crash in 2022.
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🔁 The end of fear – the beginning of hope
Finally, after all negative emotions peak, the market falls into a state of 'exhaustion' and stabilizes again.
Prices begin to stabilize – a phase called accumulation. Some more experienced or bolder investors start to return to the market, laying the groundwork for a new cycle to form.
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📌 In summary:
Psychology is a silent yet extremely powerful driver that governs all market cycles.
Understanding how emotions affect financial decisions will help you stand apart from the crowd when necessary and act more rationally.
