Why Would People Turn to Bitcoin?

NEWS ANALYSIS - Ceren Kiremitcioğlu Akyüz

Cryptocurrencies are decentralized digital assets. Because Bitcoin is produced on the network, not under the control of central banks. After the emergence of Bitcoin as a digital currency as a product of blockchain technology in 2009, their number has gradually increased and has now approached 11,000. Some part is claiming to find an answer to a digital problem. These types of coins provide advantages over traditional currencies in terms of user privacy, low transfer costs, security, control and online payment.

Economically and scientifically, money has become abstract. Especially in recent years, the use of digital and virtual money has become remarkably widespread, and Bitcoin is one of the most remarkable examples of this.

In other words, there is no legal control. Many obstacles may arise in bank transfers. In the Bitcoin system, money transfers are carried out quickly every day and every hour of the week. Bitcoin accounts are free and can be opened without any questions. In addition, the system does not provide information about user information.

At the same time, bitcoin is seen as a value that you can watch its rise without getting tired and strained while sitting in your home. However, discussions continue that this rapid increase will suddenly decrease. Research, especially in recent months, one of the most searched topics on Google “What is Bitcoin and how to buy it?” shows that. For this reason, it is possible to say that Bitcoin arouses curiosity in people and addiction to people who own this virtual currency.

As crypto coins started to take place in the investment market, many new words  were introduced into our lives. One of these concepts, “Fomo”, is among the most frequently used terms. 

Fear of Missing Out (FOMO)

FOMO means , “fear of missing out”. It is an emotion that is generally used for social media addicts and described as the most faced situation of our age. Literally, fomo can be interpreted as missing a development or being afraid of being deprived of a situation. That’s why people always want to keep their relationships up to date. The concept is regarded as a psychological need, as it is claimed to contribute positively to mental health. It can be explained as the person’s mental attachment to a situation and the feeling of relief from it.
In crypto money investments, the investor must make a rational decision. Investors can shape their investments by acting with the FOMO impulse instead of making rational decisions. In the cryptocurrency market, this situation manifests itself as a fear of missing out on opportunities. This relationship, which can be described as not being aware of opportunities or not taking advantage of the opportunities that other investors benefit from, sometimes even makes the investor make wrong decisions. For this reason, making decisions with the FOMO effect is dangerous enough to cause extremely risky situations. Emotional decisions generally lie behind untimely investments.
Cryptocurrencies are a hot topic in the media and our social circle. We hear that a lot of people are interested in cryptocurrencies, “buy and sell”, get rich or go bankrupt. We are curious. We do not want to stay out of this process and  we want to involve in it.
As we keep seeing people in the media who have made huge amounts of money from people who have lost everything because of cryptocurrencies, our probability of becoming one of the winners seems to us even higher than it actually. After all, there are more crypto multimillionaires in our memory than crypto victims.

FOMO & DOGECOIN

Another interesting example of FOMO that comes to mind is the Dogecoin issue. Dogecoin, a cryptocurrency created to make fun of other cryptocurrencies, is a digital asset that can sometimes have very spikes in price. An important reason for these come out Elon Musk’s tweets about Dogecoin. Yes, that is it… However, in theory, what determines the value of a cryptocurrency must basically be its technical infrastructure, its function, and how competently it responds to which digital problem. Dogecoin’s price increase is basically as follows:
When Elon Musk tweeted about this, those who think that the price of Dogecoin will rise suddenly start to buy Dogecoin, many people think the same way and a boom occurs with the effect of FOMO, and when the demand explodes so much, the price shows a sudden rise. In other words, if people think that something will happen and act accordingly, it can really make that thing happen. This situation highly overlaps with the Self Fulfilling Prophecy concept in psychology. This concept, Self Fulfilling Prophecy not only sheds light on some aspects of human behavior in interpersonal relationships, but also in different ways in other areas such as economics.

Nominal Price Illusion – HOPE

According to research, cryptocurrency investors tend to have a high level of belief that they will quickly make fortunes through their investments. Every person, whether rich, middle-class or poor, wants to earn money in the easy way and starts to hope … This hope leads people to dreams and wants to reach what people have dreamed in the easy way as soon as possible. So this situation is bringing to Nominal Price Illusion.

We explore the psychology of stock price levels and provide evidence that investors suffer from a nominal price illusion in which they overestimate the room to grow for low-priced stocks relative to high-priced stocks. While it has become increasingly clear that nominal price levels influence investor behavior, why prices matter to investors is a question that as of yet has gone unanswered. We find widespread evidence that investors systematically overestimate the skewness of low-priced stocks. In the broad cross-section of stocks, we find that investors substantially overweight the importance of price when forming skewness expectations. Asset pricing implications of our findings are borne out in the options market. A zero-cost option portfolio strategy that exploits investor overestimation of skewness for low-priced stocks generates significant abnormal returns. Finally, investor expectations of future skewness increase drastically on days that a stock undergoes a split to a lower nominal price. Empirically, however, future physical skewness decreases following splits.

In this case, it has been concluded that an important factor affecting the future price predictions of low priced stocks of stock market investors is the price of the stock. Accordingly, the lower the price of a stock, the investor has the misconception that the value of that stock will increase further. For example, estimates of future growth for a stock with $ 50 a lot would be higher than for a stock with $ 500. The researchers called this the Nominal Price Illusion. In another study, it has been revealed that even financial analysts have this error.

Researchers have determined that this error is also valid for crypto currency prices. They came to the conclusion that the same delusion was stronger on this platform. So cryptocurrency investors have the misconception that the low the value of a cryptocurrency, it will rise the higher in the future. However, this situation is not a financial reality with a real equivalent.

The Disease Of Today is Sunk Drain Fallacy

Sunk Drain Fallacy is the tendency to continue your investment even though you know that you no longer have to logically continue with it, or even you know that you will probably lose money if you continue. It ca be also your time, for example, the typical discourse “Whereas I gave my years to this relationship” points to this. The investment you make in this relationship can keep it going so that the years are not wasted. This is common in gambling addiction: The player who loses money continues to play in order to compensate for the money lost from the betting business.

Let’s write  about a common pattern of gambling in individuals with gambling habits: If they lose they play to compensate for their losses, and if they win they play with “the money came out of nowhere, I have nothing to lose.” After all, he plays until he loses, even though he sometimes wins, and in many cases even loses everything.

CONCLUSION

Finn Breton claims that dealing with cryptocurrencies actually represents a “culture”. According to Breton, these people sometimes see them as “radicals” who oppose traditional institutions and processes. In this way, they see themselves as people who attach importance to privacy, despise states and the basic institutions of the state, and have a command of technology. Today, this pursuit is a good hope, especially for people who are pessimistic about their future.

According to a research conducted on Bitcoin at Duke University, it has been found that if an event happens twice in a row, the human mind automatically believes that it will happen again, and with Bitcoin investments rising for a few weeks in a row, investors’ belief that the increase will continue, despite the uncertain future. Also, as the value of this virtual currency increases, people feel stronger that their predictions are correct and that they should trust their predictions more. With increasing confidence in predictions, they invest more or support their relatives that they should buy Bitcoins. Therefore, the number of people using Bitcoin is increasing day by day.

It is possible to observe that most people who invest in Bitcoin do not withdraw their money and are waiting. A study conducted by psychologists at Stanford University found that investors were not afraid of financial loss, but were concerned about the risk of earning less than other investors. At this point, the adrenaline that comes into play and the fact that the person actually enjoys the risk factors can be a determinant in the continuation of the Bitcoin passion and the increase in popularity.

Everybody can invest to everthing like dogecoin or catcoin or cowcoin, but the importand decided is that can you control yourself when you are investing to something. Are you effected of FOMO or Can you decided by yourself without anythings ? Please do not forget that ambition can kill you and your surroundings. I wish you are not going to lose your logic…