Explaining crypto investor psychology for new investors.
Introduction to crypto investment psychology
The cryptocurrency (crypto) market is a volatile, attractive, but also risky field. For those who are new to this world, in addition to learning about blockchain technology, different types of cryptocurrencies or how exchanges work, an extremely important factor that they often overlook is investment psychology. Psychology not only affects buying and selling decisions but also shapes the entire investment experience of each individual. Understanding psychology will help new investors avoid emotional pitfalls and make more rational actions in a volatile environment like crypto.
Definition of investment psychology and its role
Investment psychology is the collection of emotions, thoughts, beliefs, and behaviors of investors in the process of making decisions related to their assets. It includes both subjective factors such as greed, fear, hope, despair, and objective factors such as the influence of the crowd, market news, or unexpected price fluctuations. In the financial field in general and the crypto market in particular, psychology plays a role that cannot be underestimated. It is like an undercurrent, beneath the surface of price charts and technical analysis, silently dominating the actions of millions of market participants.
The role of investment psychology is evident in that it can cause investors to make irrational decisions, going against objective analysis and the original plan. For example, when the market grows strongly, greed and the FOMO (Fear Of Missing Out) effect can encourage investors to pour money in regardless, even borrowing to invest, without carefully researching the project or assessing the risk. Conversely, when the market declines, fear and the FUD (Fear, Uncertainty, Doubt) effect make them sell their assets at a low price, accepting losses just because they cannot bear the psychological pressure.
Understanding and managing investment psychology is an important skill, even more important than knowledge of technical analysis or fundamental analysis for many beginners. Because, no matter how good the knowledge, if emotions are not controlled, investors can still make serious mistakes, leading to heavy losses. Instead of letting emotions lead the way, investors need to learn to recognize and adjust their psychology to make decisions based on reason and a pre-determined plan.
Why is psychology important in the crypto market?
The crypto market is known for its extremely high volatility. The price of cryptocurrencies can increase or decrease by tens, even hundreds of percent in a short period of time. This volatility creates both opportunities and challenges, and is also fertile ground for psychological factors to develop strongly. It is this constant volatility that amplifies the influence of psychology on investor behavior.
When prices rise sharply, euphoria spreads, leading to a FOMO effect. People fear they will miss out on a quick way to get rich, so they rush to buy without considering. This creates price bubbles, pushing prices to irrational levels based solely on expectations and positive emotions. Conversely, when the market crashes, fear engulfs. Negative news spreads quickly, a FUD effect appears, causing investors to panic and sell off. The psychological pressure of seeing the value of their assets plummet quickly leads them to make immediate selling decisions, even if that is when the market is about to recover.
The decentralization and transparency (to some extent) of the crypto market also contribute to increasing the importance of psychology. There is no central organization controlling prices. Instead, prices are shaped by supply and demand, largely influenced by the psychology and behavior of market participants. Rumors, unverified information, or even social media posts can cause significant price fluctuations, especially for coins with small capitalization. This requires investors to have a strong mindset to not be swayed by external factors and maintain their investment stance.
The difference between crypto investment psychology and traditional investment types
Although psychology plays an important role in all areas of investment, from stocks, real estate to gold, in the crypto market, this role is even more emphasized and has its own nuances. The biggest difference lies in the level of volatility and the novelty of this market.
Compared to the stock or real estate market, the crypto market is still relatively young and has a much higher level of volatility. The stocks of large companies are often relatively stable, and price changes usually occur more slowly. Real estate is an illiquid asset, buying and selling cannot happen instantly like crypto. The strong and rapid volatility of crypto makes investor emotions more easily triggered. In just a few minutes, an investment can gain or lose a significant amount of money, which creates great psychological pressure, especially for newcomers who are not used to sudden changes.
Another difference is the "technology" and complexity of crypto. For new investors, understanding blockchain, different types of cryptocurrencies, how to use wallets, or concepts like defi, nft... is already a challenge. This lack of knowledge combined with high volatility further increases anxiety and easily leads to decisions based on guesswork or following the crowd. Meanwhile, traditional investments often have analysis and evaluation models that have been tested over time, helping investors make decisions based on a more solid knowledge base.
Finally, the crypto community has a huge influence through social media platforms such as Twitter, Telegram, Discord. Information, rumors, and even "psychological manipulation" (such as pump and dump schemes) can spread quickly, strongly impacting the emotions and behavior of investors, especially newcomers who do not have the experience to distinguish between true and false information. This is less common in traditional forms of investment, where information is often controlled and officially announced through reliable channels.
Who are the new investors and why do they need to understand this
"Newcomers" in the crypto market are individuals who have just begun to learn about and participate in investing in cryptocurrencies. They may be people who have never had experience investing in any type of asset before, or investors from traditional markets (such as stocks, real estate) who have switched over. Their common characteristics are lack of experience, limited knowledge, and susceptibility to influence from the surrounding environment.
Newcomers are often attracted by "get rich quick" stories from the crypto market, seeing huge profit potential without properly assessing the accompanying risks. They may start with a small amount of capital, or even a significant amount that they cannot afford to lose. This lack of experience and unrealistic expectations makes them vulnerable to negative psychological factors.
Understanding investment psychology is extremely important for newcomers because it equips them with a mental "shield" against the fluctuations and pressures of the market. Instead of just focusing on "which coin to buy to get rich quickly", newcomers need to learn to manage emotions, identify psychological biases, and build a sustainable investment mindset.
Understanding psychology helps newcomers realize that emotions like greed or fear are completely normal, but acting on those emotions without reconsideration is dangerous. It helps them recognize FOMO and FUD effects when they appear, so they can pause and think carefully before making a decision. It also helps them understand that learning from mistakes (whether their own or others') is an integral part of the maturation process in investing. In other words, understanding investment psychology not only helps newcomers avoid losses but also helps them build a solid foundation for surviving and thriving in this potential-rich but challenging crypto market.
Basic psychological factors that influence investors
The crypto market, with its volatility and novelty, is an ideal environment for basic psychological factors to maximize their influence. For new investors, identifying and understanding these factors is the first step to controlling them. Here are the main psychological factors that anyone participating in the crypto market needs to face and learn to manage.
Greed and fear – two dominant emotions
Greed and fear are considered the two most powerful and dominant emotions in all financial markets, especially crypto. They are two sides of the same coin, directly impacting investors' buying and selling decisions.
Greed appears when the market grows strongly. Investors see the price of their assets increase rapidly, or hear stories of others making huge profits. This stimulates the desire to earn even more money, leading to buying in a hurry, even at prices that have already increased very high (buying the top). Greed can cause investors to ignore risk management principles, invest excessively compared to their financial capabilities, or hold assets for too long in the hope that prices will continue to rise, missing the opportunity to take reasonable profits. It creates an excessive sense of euphoria, blurring the ability to analyze objectively and make decisions based on unrealistic expectations.
Conversely, fear appears when the market declines. When asset prices plummet, investors begin to worry about losing money. Loss aversion is a very strong psychological bias, causing people to feel more pain when losing a sum of money than the joy of earning the same amount of money. This fear can lead to panicked selling (selling at the bottom), accepting losses just to escape the feeling of anxiety. It can also cause investors to miss the opportunity to buy when the market falls, for fear that the price will fall even deeper. Fear paralyzes the ability to think rationally and causes investors to make decisions based on survival instincts, rather than analysis and planning.
Identifying when greed and fear are dominating is the first step to controlling them. Investors need to learn to "step back", observe their emotions without acting immediately. Instead of letting emotions decide, stick to a pre-determined investment plan, based on analysis and long-term goals.
FOMO and FUD effects in a volatile market
FOMO (Fear Of Missing Out) and FUD (Fear, Uncertainty, Doubt) are two specific manifestations of greed and fear in the crypto market. They are social psychological phenomena, spreading rapidly in the investor community.
FOMO often occurs when a coin suddenly increases in price. Investors see others making profits and fear they will miss out on the "train" to get rich. Pressure from constantly rising prices, combined with widely shared success stories, makes them feel the need to act immediately. The FOMO effect promotes hasty buying behavior, often at prices that are already too high, ignoring warning signs of an upcoming price correction. Many new investors have "caught the top" (bought at the highest price) just because they were dominated by FOMO, then suffered heavy losses when the price fell again.
Conversely, FUD is a negative psychological state, including fear, uncertainty, and doubt. FUD often appears when there is negative news about the crypto market in general (e.g., tightening legal regulations, exchanges being attacked...) or about a specific coin (e.g., the development team encountering problems, the project being hacked...). FUD can also be amplified by rumors, misinformation, or pessimism spreading on social media. The FUD effect causes investors to lose faith, become panicked and fearful. This promotes the hasty selling of assets, often at low prices (selling at the bottom), just to escape the feeling of anxiety.
Both FOMO and FUD are dangerous psychological "traps", especially in a highly volatile market like crypto. They cause investors to make decisions based on emotions and pressure from outside, instead of based on analysis and planning. To combat FOMO and FUD, investors need to remain calm, check information from reliable sources, and adhere to a pre-determined investment strategy. Don't let momentary emotions decide your pocketbook.
Confirmation bias and how it leads to wrong decisions
Confirmation bias is the human tendency to seek, interpret, and remember information in a way that confirms one's pre-existing beliefs or assumptions. In crypto investing, this bias can be very harmful.
When new investors believe that a coin will increase in price strongly (possibly due to advice from friends, reading a positive analysis, or simply feeling "like"), they will tend to seek and pay attention to information, articles, or opinions that support that belief. They will easily ignore or downplay negative information, warnings about risks, or analyses that go against their expectations. For example, if believing that Bitcoin will reach $100,000, investors will spend more time reading articles predicting price increases, watching optimistic technical analysis videos, and participating in community groups where everyone believes in that positive outlook. Conversely, they will pay less attention to analyses that point out adverse factors, the risk of price correction, or potential problems of the Bitcoin network.
Confirmation bias reinforces the investor's belief that they are "right", making them overconfident and neglecting to objectively assess the situation. It prevents them from seeing the whole market picture, including risks and challenges. When beliefs are reinforced by confirmation bias, investors easily make irrational decisions, such as pouring too much money into a single asset, not setting stop-loss points, or holding assets for too long even when the market has clear signs of a reversal.
To overcome confirmation bias, crypto investors need to actively seek information from a variety of sources, including those with opposing views. Question your own assumptions and be willing to change your mind if there is convincing evidence. Consulting with experienced people who can analyze objectively is also an effective way to reduce the impact of this bias.
Overconfidence and the illusion of knowledge
Overconfidence is a common psychological bias, especially in those who have had a few initial successes. After making a profit from one or two trades, new investors may feel that they have "grasped the secret" of the market and become overconfident in their ability to analyze and predict.
This overconfidence is often accompanied by an illusion of knowledge. New investors may think they have understood the market after a short period of learning, or after reading a few articles or watching a few analytical videos. They overestimate their abilities and underestimate the complexity and risks of the crypto market. This leads to making reckless decisions, such as investing large amounts of money in lesser-known altcoins in the hope of quickly "x"ing their accounts, or using financial leverage (margin trading) without clearly understanding the risks.
Overconfidence can also cause investors to ignore further learning, neglect risk management, and not set stop-loss points. They may believe that they are always right and the market will always go in the direction they predict. When the market goes against expectations, the initial overconfidence quickly turns into disappointment and panic, leading to further wrong decisions.
To avoid overconfidence, new investors need to remain humble and always be aware that knowledge about the crypto market is infinite and constantly changing. Treat initial successes as luck or the result of disciplined adherence, not innate ability. Always continue to learn, listen to opinions from experienced people, and constantly improve your risk management strategy. Remember that in the crypto market, humility and discipline are your best friends.
The influence of the crowd on investment behavior
The crypto market is a highly communal market. Discussions on social media, forums, and chat groups can create a strong herd mentality effect, greatly affecting the behavior of investors, especially newcomers.
The herd effect occurs when investors make decisions based on the actions of the majority rather than based on personal analysis. When seeing many people urging each other to buy a coin, or when information (positive or negative) spreads quickly in the community, new investors are easily swept away without taking the time to verify or analyze carefully. Psychological pressure from "not wanting to be left behind" (FOMO) or "not wanting to be the last one out" (when the market declines) drives them to act according to the crowd.
The influence of the crowd can lead to the creation of price bubbles when people push prices up irrationally together, or cause panic sell-offs when negative news spreads. New investors, lacking experience and knowledge, are often more susceptible to crowd psychology. They may consider the actions of the majority as "right" and safe, without realizing that the crowd can also be wrong and lead to bad outcomes.
To deal with the influence of the crowd, crypto investors need to develop independent and critical thinking skills. Question the information and advice received from the community. Conduct your own research and analysis before making a decision. Don't be afraid to go against the crowd if your analysis shows it is reasonable. Remember that in the financial market, successful people are often those who can think and act differently from the majority when necessary.
Common psychological mistakes new investors often make
Stepping into the volatile world of crypto, new investors often face countless temptations and psychological pressures. Lack of experience, limited knowledge, and emotional control make them prone to common mistakes that can lead to heavy losses. Identifying and understanding these mistakes is an important step to avoid repeating them. Here are the most common psychological mistakes in new crypto investors.
Buying high and selling low due to emotional reactions
The mistake of "buying high, selling low" is perhaps the most classic and common mistake for new investors, and its core cause is acting on emotion instead of reason.
When the crypto market grows strongly, the price of coins is constantly setting new peaks, and euphoria engulfs. New investors, dominated by greed and the FOMO effect, see others making profits and fear they will miss out. Psychological pressure from seeing prices constantly rising makes them unable to restrain themselves and rush to pour money into buying, often at very high prices, right at the "peak" of the growth. They expect the price to continue to rise, but in reality the market always has corrections.
Conversely, when the market reverses and prices begin to fall rapidly, fear engulfs. New investors, witnessing the value of their assets decreasing day by day, feel anxious and panicked. The FUD effect and psychological pressure from fear of losing all their money lead them to make decisions to sell off their assets, often when prices have fallen very deeply, right at the "bottom" of the correction. They sell because they cannot bear the psychological pressure, even though sometimes that is when the market is about to recover.
Buying high and selling low is the vicious cycle of investing based on emotions. When euphoric, they buy regardless of risk. When afraid, they sell without considering. To avoid this mistake, new investors need to learn to control their emotions. Build a clear investment plan from the start and stick to it. Buying or selling decisions should be based on technical analysis, fundamental analysis, and a pre-determined capital management plan, not on momentary feelings or short-term price fluctuations.
Following the crowd without analysis
As mentioned, the herd effect has a huge influence in the crypto market. New investors, lacking experience and knowledge, are often easily swept away by the actions of the majority. This is a very common psychological mistake.
When participating in community groups, forums, or following social media, new investors often see many people discussing a potential coin, or buying into a specific asset together. They may believe that "many people doing it must be right", or simply feel safer acting like others. Psychological pressure from "not wanting to be different" or "not wanting to miss out on an opportunity that everyone knows" makes them easily follow the crowd without taking the time to research and analyze themselves.
For example, a "meme" coin may suddenly increase in price just because it is being pumped by a large community on social media. New investors, seeing the price increase rapidly and being hit with FOMO, rush to buy in following the crowd without researching the project, the development team, or the true potential of that coin. As a result, when the crowd "dumps", the price drops sharply and the new investor is the one who suffers the most damage.
Following the crowd without analysis is an extremely risky investment strategy, especially in the crypto market where information is mixed and price manipulation can occur. To avoid this mistake, new investors need to develop independent thinking skills. Treat information from the community as a source of reference, but not as the sole basis for making decisions. Always research yourself (DYOR - Do Your Own Research), evaluate the project, analyze price charts, and make decisions based on your own understanding, not just because others are doing it.
Ignoring risks and underestimating market volatility
Another common psychological mistake of new investors is excessive optimism, leading to ignoring risks and underestimating the volatility of the crypto market.
New investors are often attracted by the huge profit potential that this market offers. They hear stories of quickly "x"ing their accounts, see the price of Bitcoin or Ethereum skyrocketing in the past, and form an unrealistic expectation of profits. This optimism makes them pay less attention to potential risks, such as the risk of losing capital, sudden price fluctuations, technological risks (e.g., project being hacked, smart contract errors), legal risks, or exchange risks.
They may invest an amount larger than their ability to accept losses, or not diversify their investment portfolio but focus on only one or two "hot" coins. They may also not set stop-loss points - a basic risk management tool - because they believe that prices will always recover. Underestimating market volatility prevents them from preparing mentally for strong and sudden price declines. When that happens, they easily fall into a state of panic and make wrong decisions as analyzed above (selling at the bottom).
To avoid this mistake, new investors need to have a realistic view of the crypto market. Understand that high returns always come with high risks. Always prioritize risk management. Only invest the amount you can afford to lose. Diversify your investment portfolio to spread risk. Learn to use risk management tools like stop-loss. Most importantly, be mentally prepared for strong and sudden price fluctuations. Don't let excessive optimism cloud your ability to see risk.
Not learning from past failures
Failure is an unavoidable part of the investment journey, especially in the challenging crypto market. However, a common psychological mistake of new investors is not learning from their own or others' failures.
When facing losses, new investors may feel disappointed, discouraged, or even angry. Instead of spending time analyzing the causes of failure (e.g., due to FOMO buying the top, following the crowd, not managing risk...), they may blame the market, blame others, or simply want to forget the bad experience as quickly as possible. Failure to analyze and learn from failures makes them easily repeat similar mistakes in the future.
Conversely, when profiting from a trade, new investors may consider it due to their "talent" without realizing that there may be elements of luck or favorable market conditions contributing to that success. This overconfidence also prevents them from further analyzing the reason for success to apply to later transactions.
Learning from failure is an ongoing and important process for growing in crypto investing. New investors need to have a receptive attitude, treating failures as valuable lessons. Every loss is an opportunity to review the strategy, analyze psychological mistakes, and adjust investment behavior. Keep a trading diary to track your decisions and their results. Analyze both successful and unsuccessful trades to better understand your strengths, weaknesses, and how the market works. Only when willing to face and learn from mistakes can new investors improve their skills and increase their chances of long-term success.
Psychological management strategies for crypto investors
Identifying psychological factors and common mistakes is the first step. The next and more important step for new crypto investors is to build and apply effective strategies to manage their psychology. Good psychological management does not mean completely eliminating emotions, but learning to recognize them, control one's reactions, and make decisions based on reason and a pre-determined plan. Here are essential psychological management strategies that new investors need to practice.
Build a clear and disciplined investment plan
One of the most effective tools to combat emotional control is to have a clear investment plan and adhere to it with discipline. This plan is like a map and compass to help you go in the right direction in the volatile market.
An investment plan should include the following factors:
Investment goals: What do you want to achieve from investing in crypto? Short-term or long-term goals? What is the expected profit?
Risk tolerance: How much capital loss can you accept? Clearly define the level of risk you are comfortable with.
Investment capital: Only invest the amount you can afford to lose. Do not borrow to invest in crypto.
Investment strategy: What types of assets will you invest in (Bitcoin, Ethereum, Altcoins)? What is your buying/selling strategy (e.g., periodic accumulation - DCA, short-term trading, long-term investment)?
Entry/exit points: Determine in advance when to buy or sell based on analysis, not emotion. Use tools like stop-loss and take-profit.
Risk management plan: What will you do when the market goes against your analysis? Where to set the stop-loss? What is the percentage of capital invested in each asset?
After building a plan, the most important factor is to maintain discipline. When the market fluctuates sharply, it is easy to be tempted by greed or fear and deviate from the plan. Treat your investment plan as an inviolable set of rules. When emotions run high, stop, take a deep breath, and review your plan. Maintaining discipline helps you make decisions based on reason that has been prepared in advance, rather than reacting momentarily based on emotion.
Example of a simple risk management plan:
Element
Detail
Maximum investment capital
10% of total assets that can accept risk.
Capital allocation ratio
No more than 20% of capital into a single Altcoin. No more than 50% into Bitcoin/Ethereum.
Stop-loss
Always set a stop-loss, do not accept a loss of more than 10-15% for each transaction (for short-term trading).
Take-profit
Determine take-profit targets based on technical analysis. Split the take-profit order.
Checking frequency
Check the investment portfolio no more than 1-2 times/day to avoid overreacting.
Action when FUD/FOMO
Pause trading, review the plan, read news from reliable sources.
Having a clear plan and following it with discipline will help new investors significantly reduce wrong decisions caused by emotion.
Using analytical tools to reduce emotion
Technical analysis and fundamental analysis are objective tools that help investors make decisions based on data and information, rather than emotion. Using these tools effectively can help reduce the influence of psychology.
Technical analysis: Focus on price charts, trading volume, and technical indicators to predict future price trends. When you rely on chart patterns, trend lines, support/resistance levels, or indicators such as RSI, MACD to make buying and selling decisions, you are relying on objective data instead of the feeling that "the market is up" or "the market is down". Learning to read and understand price charts helps you have a more logical view of market fluctuations, instead of just seeing random numbers rising and falling.
Fundamental analysis: Focus on the internal factors of the crypto project, such as technology, development team, utility of the coin, competitors, market potential, and macroeconomic factors. Fundamental analysis helps you better understand the real value of the project and its long-term development potential. When you invest based on belief in the technology and the team behind a coin, you will be less shaken by short-term price fluctuations caused by crowd sentiment.
Combining both technical analysis and fundamental analysis helps new investors have a more comprehensive and objective view of the market. It provides a solid foundation for making decisions, instead of just acting on emotion. When you have a clear reason (based on analysis) to buy or sell, you will be less affected by FOMO or FUD. However, keep in mind that analytical tools are only predictive and do not guarantee 100% success. Learning and applying them flexibly is essential.
Relaxation techniques and daily emotional control
The crypto market operates 24/7 and the constant volatility can cause stress and anxiety for new investors. Practicing relaxation techniques and daily emotional control is very important to maintain calm and avoid making hasty decisions.
Limit price checks: Constantly checking prices can increase anxiety and stimulate negative emotional reactions. Set a limit on how many times you check the price each day (e.g., only 1-2 times). If you are investing long-term, checking prices hourly or minutely is completely unnecessary and only makes you more stressed.
Meditation and mindfulness: Practicing meditation or mindfulness exercises helps you become more aware of your thoughts and emotions without judgment. This helps you "step back" from momentary emotions and make more informed decisions.
Exercise: Physical activity helps relieve stress and improve mood. Taking time to exercise regularly is an effective way to manage emotions.
Get enough sleep: Lack of sleep can reduce concentration and emotional control. Make sure you get enough sleep to make sound investment decisions.
Find other hobbies: Don't let crypto investing dominate your life. Spending time with family, friends, and personal hobbies helps you balance your life and reduce pressure from the market.
Training the ability to recognize and control emotions takes time and persistence. Consider this an important skill to be cultivated in parallel with market knowledge. When you can maintain calm even in the most chaotic market times, you have a great advantage over other investors who are dominated by emotions.
Learn continuously from the community and experts
The crypto market is constantly changing and evolving rapidly. Continuous learning is key to survival and success. For new investors, learning from the community and experts is an invaluable resource.
Participate in reputable communities: Find and join quality crypto communities where people share knowledge, experience, and analysis in a constructive way. However, be careful with communities that only focus on "pump and dump" or spread FUD/FOMO. Select information and do not blindly trust any investment advice.
Follow credible experts: Seek out experts, analysts, or those with long experience in the crypto market and follow their articles, videos, or podcasts. Learn from how they analyze the market, manage risk, and control psychology.
Read in-depth books and materials: Don't just rely on information on social media. Find and read books, research reports, and in-depth materials on blockchain technology, crypto, and investment strategies.
Learn from mistakes: As mentioned, carefully analyze unsuccessful trades to learn lessons. Learning from your own mistakes is the most effective way to learn.
Learning from others helps you expand your knowledge, access different perspectives, and avoid mistakes that predecessors have made. However, always maintain a critical attitude and never consider any advice as "certainly true". Combine learning from outside with your own independent analysis and thinking.
Set risk limits to protect capital
Setting risk limits is an extremely important capital management strategy, helping new investors protect their accounts from large losses due to market volatility or wrong decisions due to psychology.
Only invest the amount you can afford to lose: This is the golden rule in crypto investing. Never invest money that, if lost, will seriously affect your life. This helps reduce psychological pressure and allows you to make more rational decisions.
Set stop-loss points: For short-term or medium-term transactions, setting a stop-loss point is mandatory. A stop-loss is an automatic order to sell assets when the price falls to a certain level. This helps limit the maximum loss for each transaction and prevents "averaging down" in the hope that the price will recover (an action often stemming from fear and illusory hope).
Do not use excessive leverage: Margin trading and leveraged products can amplify profits but also amplify the risk of losses. For new investors, using leverage is extremely dangerous and can easily lead to account liquidation due to a small price fluctuation. Stay away from leverage until you have enough experience and knowledge about risk management.
Diversify your investment portfolio: Do not put all eggs in one basket. Allocate capital to different types of assets (not only crypto but also other types of assets if possible) and to many different coins in the crypto market to minimize risk when one asset or group of assets declines sharply.
Regularly review your portfolio: Periodically (e.g., monthly or quarterly) review your investment portfolio, evaluate the performance of each asset, and readjust the capital allocation ratio if necessary.
Setting and adhering to risk limits helps new investors survive long-term in the crypto market. When you know what your maximum loss is, you will feel more confident and less dominated by fear when the market declines. Good risk management is the solid foundation for effective psychological management.
Conclusion
The crypto market is a field full of potential but also full of pitfalls, especially for new investors. Understanding and managing investment psychology is key to survival and success in this volatile environment. By identifying basic psychological factors such as greed, fear, FOMO, FUD, confirmation bias and overconfidence, new investors can avoid common mistakes such as buying high, selling low, following the crowd, ignoring risks and not learning from failure. Building a clear investment plan, maintaining discipline, using objective analytical tools, practicing emotional control techniques, learning continuously, and especially setting risk limits to protect capital are effective strategies to help new investors overcome psychological challenges and build a sustainable investment journey in the crypto world.
