Adapting To The New Market Psychology

The pandemic surely altered the cycle of global markets and investors activities. However, recently the sentimental behavior of investors witnessed obvious changes with risk appetites increasing on regular basis.


This increase in risk appetite was originally triggered by the introduction of cryptocurrencies to the world. Investors or even non-investors are now aware of the massive profits that are being made in the market, and new exchange platforms are playing a vital role in smoothing up the trading experience.


That being said, we can witness newly created correlations between the traditional markets and the cryptocurrencies. When talking about the crypto market we tend to take Bitcoin as a regular benchmark given its market value and daily traded volume.


Bitcoin is now nicknamed as “Digital Gold” and the reason for that is the similarities in the investment nature. Precious metals have been used for decades as value assets, safe haven investments, and of course units of exchanges. Bitcoin on another hand is being used for the same purposes in the crypto world, whereby investors mainly use it to hedge their positions against smaller value currencies.


Over the past 7 years, calculated data show that we have somewhat a positive correlation occurring between Gold and Bitcoin, however we still do not have a clear prediction of that relation given the differences in volatility, supply changes, and ease of liquidity.


 With recent market news we witnessed major drops in the values of major cryptocurrencies, and that was mainly due to the risk-off sentiment mindset triggered by the newly spread Covid-19 variant “Omicron”. This is where we witness market contradictions occurring, whereby Bitcoin decreased in value with fears created from the variant acting as a risk-on sentiment asset.


With the data collected combined with the new behavior of the investors, it is obvious that the fat fingers in the market have changed. The new comers or new generation that entered the market have a completely different mindset. We need to analyze the psychology of these new investors in order to constantly adapt to the changes in the market behavior.


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The content published above has been prepared by CFI for informational purposes only and should not be considered as investment advice.  Any view expressed does not constitute a personal recommendation or solicitation to buy or sell.  The information provided does not have regard to the specific investment objectives, financial situation, and needs of any specific person who may receive it, and is not held out as independent investment research and may have been acted upon by persons connected with CFI.  Market data is derived from independent sources believed to be reliable, however, CFI makes no guarantee of its accuracy or completeness, and accepts no responsibility for any consequence of its use by recipients.