Understanding Market Biases in Crypto



**Market biases in crypto means the tendencies for traders to make decisions that are based on emotional factors** rather than on rational analysis. The term biases mean a systematic deviations from rationality in decision making. These deviations in this decision making can be included by emotions which can make one take decisions that are rash or irrational at times.



**Similarly in the market, biases do occur as there's always a scale between people's emotions which can be justified on greed or fear**. In the crypto market, these biases refer to the those tendencies that are psychological which affects how traders or investors in the crypto ecosystem act on market information or analysis.

**These biases can affect the price of an asset, trends and dynamics in the market. We have different forms of biases in the market which includes;**

- **Bearish bias:** This is a type of bias that occurs where trades are pessimistic about the future of a crypto asset. This bias can lead to huge selling pressure due to the decline in price of that asset . This is as a result of emotions attached which can be very bad, leading to decisions that one may live to regret later in future.






- **Another bias is the bullish bias.** You may be shocked how this comes in as traders would be in so much profits. It occurs when traders in the market are overly optimistic about the future of a particular crypto asset like this **Pi network for example**. Miners of this proposed future coins believe this coin would be the next bitcoin and will hit more then the bitcoin itself. **Their optimism is just placed on the high as they believe so much in its future.**






- **Anchoring bias is another bias that occurs when individuals rely on certain reference point when making decisions on investment**. They may anchor their hopes on a particular asset's past highs or lows which can lead them into making trading decisions that are very biased without even considering the conditions of the market and how it can be influenced by manipulations from whales and market dynamics.


- **Availability bias** is one that occurs when investors focus too much on the recent price movements of an assets, sentiments on social media and the likes which leads to trading decisions that are biased. These traders overestimate the importance of information that is readily available which make them fall for this bias in their trades and can lead to losses that misplace one's emotions.


- **Confirmation bias is when traders seek information that confirms ones existing belief**, ignoring contradictory evidence that may be helpful in some way. This confirmation bias can lead traders to overlook warning signals which can lead them to making decisions that aren't worthwhile, or ones that are biased as the case may be.


With these biases, **there are advantages and disadvantages involved in the market of which one is market liquidity**. It often leads to increased trading activity and allows traders enter and exit positions easily without running Losses. It also allow traders capitalize on volatility in price in whatever form of trades they enter which can be swing or day trade.


**These biases too create opportunities for arbitrage in different assets** which can benefit traders and investors seeking to exploit inefficiencies in the market. Moving in prices also contribute to rapid movements in the prices of an asset which offers traders opportunities for traders to earn from short-term fluctuations in the prices of an asset.



**The disadvantages include the risk of making irrational decision which can lead to losses.** Market manipulation and false signals can increase the bias in the market as they'll be misplaced emotions in the market.


**In conclusion,** this market bias is one of the reasons fear and greed emotions in the market which can cause biased trading decisions, leading to losses on the traders part.

**All screenshots are from my binance account**

> **Disclaimer** :Any financial and crypto market information provided in this post was written for informational purposes only and does not constitute 100% investment advice. It's just basic knowledge every crypto trader or investor should have