How Mass Media Drives Your Decisions When It Comes To Cryptocurrency InvestingIt’s no secret that a large part of investor decisions in the cryptocurrency market is influenced by what investors find on social media. Companies which can reach out and create workable customer relationships can thus gain a competitive advantage. However, as younger digital natives become wealthier, and as their reliance on social media news grows, the above strategy will only become more and not less.
Contrary to popular belief, social media is not only a “young person’s game”. A Cogent Research paper indicates that about 90 % of investor groups in the high net worth bracket use social media sources to take crypto investment decisions. 70 % of them have changed relationships or have relocated investments elsewhere.
This sounds like a very good opportunity, which many crypto investments-related businesses seem to forget. It’s unfortunate since social media allows companies to directly access their communities and give important information. Currently, there are various companies that delegate this work to other entities, such as crypto brokers or blockchain advisors, to share their stories for them. However, they have limited control over how their stories and updates are shared through various layers. This, in turn, increases the risk of dropping out information or distorting it, thus, a direct relationship with the community is essential to avoid such situations, especially when operating in the crypto niche.
Understanding the basics of Bitcoin Price influencing
The desire to keep and multiply one’s capital is the main driving point behind any investor’s decision to buy Bitcoin, or cryptocurrencies in general. This is quite achievable provided you know the ins and outs of analyzing and predicting what moves the prices back up. It also depends on how fast the trader reacts to the changes in the market situation and takes an appropriate decision within the required time.
There is quite a bit of similarity when it comes to the laws and dynamics that govern both the Stock market as well as the cryptocurrency market. The rate of Bitcoin and other cryptocurrencies are dependent on the changing demand in the market as well as the offers on it.
The Definition of Cycle FOMO-FUD
At the time of writing, the total consolidated market capitalization in the cryptocurrency market exceeded the $800 Billion mark. Because the cryptocurrency market is not regulated at the same level of stock markets, and no proper ethical standards are established, a certain atmosphere of impunity and permissiveness persists in the market. The FOMO-FUD cycle thus has become an important tool in the cryptocurrency market. We shall now explain the key terms in brief below.
- FUD: “Fear, Uncertainty, And Doubt”: It refers to a deliberately created situation when some unconfirmed news or circulating rumors have a profound impact on a particular cryptocurrency’s value and its exchange rate. This is obviously beneficial to only a narrow segment of crypto traders. Thus, FUD can be described as a tactical information impact, directed mainly at stimulating a feeling of panic or doom into the market. This, in turn, leads to massive volumes of sell-offs, more commonly referred to as “disposal of assets”.
- FOMO: “Fear of Missing opportunity”: This concept is borrowed heavily from the psychology, “Fear of missing opportunity”. Most individuals who face this phenomenon are usually newcomers and novice traders.
How Does This Affect The Psychology Of Purchase?
It is not common to find an individual affected by the psychology of the purchase, especially in times when the exchange rate and the agiotage attached are growing. As a trader, your subconscious can paint bright prospects in case of a constant increase. This can influence your brain into taking decisions based on the sense of fear of losing out on a profit rather than basing it on logic and analysis. Such decisions are a common problem for novice traders, with most people losing significant money by making a wrong decision at the wrong time.
This psychology almost follows a cycle of a series of deliberate actions, aimed primarily at altering and forming the necessary opinion of the audience. In other words, this is a psychological manipulation, done by working with information fields to create the necessary dynamics.
“During this cycle, FOMO and FUD distributors are engaged in a psychological and information war as they compete for the attention of a curious investor who is inherently vulnerable because he is always in search of deep opinions that could contribute to the best decision to invest funds. It’s a bit ironic that in the crypto world, the opinions of others can do more harm than help” – Doctor of Philosophy and Cognitive Neurobiology, Bobby Azaryan, on how a natural cycle of fear and greed is used to promote specific interests.
This psychology, however, is not restricted at providing competition for investors and their resources. It can also be used to harm or malign a rival project. This is driven by the single motive of not allowing any other token to exceed in value over their own token, allowing them to attain a higher place in Coinmarketcap.
Influence of the Mass Media on the Bitcoin Rate
Apart from the classical influence scheme, large players have the power to increase the demand of any cryptocurrency by purchasing it in large volumes, raising the rate and creating the illusion of stable growth. They begin to dump their assets as soon as their trades peak, so that the rates may go down to the minimum values.
Another influence mechanism refers to creating artificially inflated popularity and ego around the desired token. Thus many present media houses push to publish the “hottest” news on a regular basis about the cryptocurrency they are promoting.
According to this study, interesting differences at the social influence level are revealed after studying the dynamic relationships between social media and Bitcoin returns. The numbers of bullish and bearish tweets by all users have negligible effects on bitcoin returns in the next hour. However, if the sample to tweets from those users with the most followers is limited, the relationship becomes much less significant. This suggests that follow-the-influencer behavior exists in the bitcoin market.
On the contrary, posts from the silent, but salient majorities have a stronger association with future Bitcoin returns as compared to posts from the most active Internet forum contributors. Therefore, Investors should analyze empirical data and carefully select the most influential people in a social network to collect information.