How Psychology Drives Market Cycles

Bullish Trend

Optimism is widespread during a bull market. Rising prices generate excitement, and neurobiology tells us that this activates the brain's reward system, releasing the neurotransmitter dopamine.

Emotional phenomena like FOMO (fear of missing out) tend to amplify this trend. FOMO arises from the brain's social reward pathways, as we are physically programmed to seek inclusion and avoid missing opportunities. Social media platforms like X and Reddit can exacerbate FOMO by showcasing stories of massive gains, encouraging others to buy assets without fully understanding the risks.

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