Ramit Sethi is a known figure in the Wealth Building space. He is the author of bestselling book “I Teach You To Be Rich”. Considering the recent situation in the cryptocurrency market, Sethi suggested that those who traded Bitcoin based their investment decisions on sentiment and not fact. According to him, cryptocurrency hodlers don’t depend on rational analysis but on emotional identity to make their investment decisions.
Hodling Based On Sentiment Not Fact
In Sethi’s opinion, cryptocurrency investors don’t want to let go of the assets even in a bearish market because they consider investing in crypto as part of their identity and not just an investment that it is. Because of this, they don’t make rational investment decisions and double down on losing positions.
Even people who don’t have tires in the cryptocurrency industry know that 2018 has been a difficult year. The short-term investors who were looking for get some profit suffered the most loss thanks to the downtrend that has been ongoing since the beginning of the year. Even with the optimistic predictions from many experts, the downward trend has continued.
Sethi believes that the tendency of doubling down on a decision even when all evidence shows that its a bad idea is common among cryptocurrency investors. Some of these investors haven’t made any money from investing in cryptocurrencies and, with the current market trend, their chances of making money are slim. Still, they insist on holding their investment position that is costing them money.
Sethi made reference to the ‘buying the dip’ theory that has now become popular in the cryptocurrency market. He said that this theory provides evidence that decision making is no longer required in crypto investment. People now make cryptocurrency investments from a purely emotional standpoint. This kind of behavior can be compared to how people double down their support of politicians even after bad behavior is exposed.
Sethi also stated that developing emotional identities based on inaccurate information and flawed thought patterns is not a new trend. This is particularly true when it comes to the financial sector. Sethi believes that this kind of trend is what influences how most people think. They go on their entire lives believing that society is governed by a set of rules that are engraved in stone. Sometimes, they fall victims to societal pressure without their knowledge. Eventually, human adherence to these unwritten rules will become dangerous as it will convince people that they must do certain things even if they don’t want to do them.
What Can Be done To Fix It?
As a possible solution, cryptocurrency investors and other groups in the society need to regularly analyze their actions auditing the unspoken messages that form the core of their identities. By doing this, they will not get trapped in irrationality in a bid to preserve an identity that isn’t beneficial to them. When this happens, people will no longer associate their identities with cryptocurrencies and will be able to make rational investment decisions that are not based on sentiment.