Bit coin is used as alternative currency for transactions and many people also considers Bit coin as an investment option.
But be aware you are not in the trap of “Herd Mentality” and considering Bit Coin as your alternative investment.
So how Herd Mentality works?
1. “Herd Mentality and Social Pressure Of Conformity’ Is a Powerful Force”
This is because most people are very sociable and have a natural desire to be accepted by a group, rather than be branded as an outcast. Therefore, following the group is an ideal way of becoming a member.
What people do to become a member of the group –
Generally in offices few people may start smoking or drinking which makes them acceptable in a group who smoke or drink.
In fact few people confessed who drink to create circle with their bosses or seniors so that they get some benefit or may be promotions
2. “Herd Mentality and The Common Rationale That Such a Large Group Can’t Be Wrong”
Even if you are convinced that a particular investment idea is irrational or incorrect, you might still follow the herd, believing they know something that “you” don’t.
This is especially prevalent in situations in which an individual has very little experience.
The best example in this case is when markets are going up, every one wants to invest in market. Investors also do lump sum investing when markets are going up, thinking they may lose the opportunity of making money by not investing.
What they don’t realize is as the markets are going higher and higher, their risk is increasing and risk of downside also increases.
3. Why Bitcoin images are golden in colour ?
Lets see the visual impact of image in our mind –
We have to understand product images are playing softly from your psyche, when it’s gold in color unknowingly you are relating the same with something precious.
4. Difference between Bitcoin and Electronic currency
5. So how Bitcoin is mined and resources required to mine Bitcoin ?
Check this video out to know the process of mining Bitcoin
Video credit – CNBC
6. Should we invest in Bitcoin?
Answer to this depends on each individual’s risk taking capacity, his understanding about the product
If you are not able to explain others in few simple lines, why you invested in a stock/share than don’t invest in that stock/ share. So invest, only if you understand what in what product you are investing.
– Warren buffet
7. Listing in futures
On 10th December Bitcoin will be listed in CBOT (Chicago board of Exchange) for future trading, imagine the traders or investors who have bought at lower levels, will just buy some puts to hedge the position and if this crashes will make huge amount of money again.
So the smart guys out there, have made money while its going up, and they will again make money when its going down
In fact these smart guys who have bought at lower levels, will make much more money while value of bit coin goes down by buying puts in option market.
Invest only if you understand the process of Bitcoin in-depth, its future usage and most importantly will it sustain the euphoria and price which is there in Bitcoin exchange.
So before you invest keep below points in mind –
- You are not following the “Herd Mentality” just because your friend or relative is making money in the investment, you are getting tempted to jump in it.
- Invest in Bitcoin only if you understand the product or take risk which you can afford to loose. Don’t invest just because you will lose out opportunity.
- Use common sense (which is not so common) , remember that ‘whenever there is a demand for the product, supply will be created through new entrants in the market and that will push the prices lower sooner or later’.
- Hence competitors of Bitcoin are 1. Litecoin (LTC), 2. Ethereum (ETH), 3) Zcash (ZEC), 4) Ripple (XRP), 5) Monero (XMR), so competition will be there and euphoria around Bitcoin may calm down.
disclaimer -this post is my personal opinion for educational purpose, should not be considered as opinion to buy or sell.
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