The relationship between Bitcoin and market psychology seems to be a relationship of influence and influence, where there is an influence by market psychology on the price of the bitcoin. But, on the other hand, sometimes it impacts the psychology of the market, where market psychology is related to studying investors and traders’ psychological and emotional state and how to influence them to push them to trade and buy.
What market psychology?
It is necessary to identify the concept of psychology before talking and expanding on the relationship between Bitcoin and market psychology, where psychology can be defined as the idea that revolves around market movements and how they are affected or harmonized with the emotional and psychological state of the participants in it, and this is what we are talking about among the most prominent topics of the economy Behavioral, a field that examines the influences that precede economic decision-making.
There is an excellent belief by many that emotions and feelings are the main reason for the changes and transformations that the financial markets are exposed to, and this feeling among investors and traders, which is a volatile feeling, is the main reason for coming up with the concept of psychology and psychological market cycles.
As market sentiment can be defined as the general feeling prevailing among investors and traders in the event of a movement in asset prices, meaning when there is a continuous rise in prices and market sentiment moves in the positive direction, we say that the market is bullish or bullish. On the other hand, the opposite is true when there is a decline in prices. Hence, we constantly say that the market is a bear market.
Bitcoin and market psychology
We can clarify the nature of the relationship between bitcoin and market psychology through the proverbial method, as the bullish bitcoin market that prevailed in 2017 is a prominent example of the role and impact of psychology on prices and the role of prices in influencing psychology, so there was a rise in the price of bitcoin from $ 900 up A level of $20,000 during the period from January to December of 2017.
The rise in the price of Bitcoin had a positive impact on the market sentiment, as there was significant and prominent participation by thousands of new investors to invest and trade in the market. They caught their enthusiasm for the bull market, or what is known as FOMO, and the positivity in the market and investors’ participation pushed the prices up very quickly.
But the unthinkable happened, as the market trend began to reverse at the end of 2017 and the beginning of 2018. As a result, new investors started to reap many losses; even when it was clarified that the market trend had become a bearish market, their confidence and satisfaction with themselves and the market’s performance became very little and bad.
After several months, the market sentiment has become very bad. Investor confidence is terrible as well, and the fear and suspicion that dominated the investors who bought high prices led to the sale of bitcoin, at prices close to the bottom that exposed them to many losses. Then a state of disappointment took over the bitcoin.
Here, we have presented everything related to the relationship between Bitcoin and psychology, providing a clear definition of the concept of market psychology and explaining the nature of the relationship between Bitcoin and this psychology.