Crypto Academy Season 3 - week 5 || Homework post for Professor @allbert : Psychology and Market Cycle

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Hello everyone, continuing the learning process today I am writing this homework post "Psychology and Market Cycle " for Professor @allbert . Let's start without further adeu:

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Explain in your own words what FOMO is, where in the cycle it occurs, and why? (crypto chart screenshot explanations needed)

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The acronym FOMO stands for ‘Fear of missing out.” It occurs when the bullish market creates a tempting situations that entices people to make wrong entry into the market at the wrong time. It commonly happens with those who are naïve and new in marketing.
The clamor created by media and advertising about the skyrocketing prices of particular crypto is hard to resist for that group of people. In the fear of being missed out they invest in cryptocurrency, stocks, etc. at the wrong time and end up losing their hard-earned money in the blink of an eye.

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In other words, the market cycle witness many shifts, and each shift generates emotions: it is a psychological play where Hope, optimism, Belief and Thrill is triggered by the bullish market in which value spikes exponentially, and then we end up miscalculating the future which makes us jump. The greed of making riches overnight is the underlying cause for FOMO.

It would not be wrong to say that in the crypto world one can make overnight bucks when the market is in upswing but uncertainty always looms over and the situation can turn turtle within no time.
The price rise gets more ignitions with the influx of buyers thronging the market, when it reaches Euphoria the big-wigs pull out their assets which are followed by the market crash which comes at the disappointment of those who have made wrong entry.

Keeping this in view FOMO is a situation when the market rallies against our expectations and takes a toll on our investments that we make at the wrong point hoping to make extra bucks.

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Explain in your own words what FUD is, where in the cycle it occurs, and why

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FUD is a hopeless situation that occurs when the bearish trend enters the last stage. In this situation, we fear a further downtrend in the market and pull out our assets to prevent further loss. It happens when fear dominates and the analytical thinking takes the back seat. This situation forces us to pull out investment to prevent further loss. But this time our emotions fail us as the market begins to recovers and the bearish trend starts diminishing.

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For example, Person A invests $2000 in Crypto after some time prices start falling, the person starts getting uncomfortable but somehow holds on in hope o trend-reversal, but it doesn’t work the way he expects and he loses 2%, 5%, 8% and then 10%. Startled by the downtrend, fear surrounds him and he withdraws the amount to save the remaining part.
After his withdrawal, the market might go further down by few more percent (2%, 3%, or more) as the bearish trend is in the last stage but as the bearish trend breaths last the bullish trend ramrods and markets recovers by 5%, 10% and goes up and up so up that if the Person A would not have pulled out, his $2000 would probably have doubled to $3500 or more.

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Choose two crypto-asset and through screenshots explain in which emotional phase of the cycle it is and why. Must be different phases

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BTC

The screenshots used above depict disbelief zone in BTC i.e it is the emotional phase that gears up for hope. The price of an asset has started picking up the pace but traders are still waiting for the positive vibes. Their confidence will increase as the emotional phase enters the area of hope with a bit of more price hike. No sooner than the traders start taking positions in the market with hope and optimism phase conspicuous, the trend will shift and bullish run will be catapulted in the BTC market.

TRX

As you can see in the screenshot currently TRX is in a panic zone and price, more price fall could be expected because whales have taken out their assets and small investors are taking out their holdings as the anxiety of more decline in prices wafts around the market. This price fall will drag the investors into depression and add to their anger. But there is a catch, if you have understood the FUD you will certenly think differently and hope against hopes , in that case you have no where to go because you are gonna wait for the forthcoming bullish trend.

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Based on the analysis done in question 3, and the principles learned in class, make the purchase of 1 cryptocurrency in the correct market cycle. The minimum amount of 5 USD (mandatory), add screenshots of the operation and the validated account.

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For the sake of completion of this task I have picked up TRX to make the purchase, as it is currently in panic zone and a hope of bullish run I make a purchase.

I have followed these simple steps to execute this:

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• I open my WazirX, and click on market from the bottom panel.

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• At the top right corner, there is a search bar where It type TRX/BTC and click on it.

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• I can Buy as well as sell Trx here, for now I'll be buying TRX for 5 USD, as mandated by the professor.

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• I enter the amount and then click on buy option shown.

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• After that I confirm transaction and within no time i got trx for BTC.

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Hence, transaction successfully carried out

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CONCLUSION

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After doing this lecture I am of the view that sporadic human emotions feuled by changing market phases play a vital role in the trading world. In the unpredictable crypto world one must master the art of keeping emothions in control and learn to take bold and firm decisions based on tradesmen-viewpoint.

Thanks for being with me ...

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