Let me tell you about Sarah. Sarah, a 32-year-old marketing executive, felt the urge to make her first investment in crypto last year. Ethereum, she learned, was the “next big thing.” She had watched her friends post about their newfound wealth, the Lambo memes, the whole nine yards. Cynthia found herself succumbing to the pressure of FOMO and agreed to invest most of her savings. Some evenings, she tells herself she made a mistake when she made that decision. She bought in near the peak. You can guess what happened next.

Sarah’s story, I know, sounds familiar to a lot of you. It’s not just about Ethereum— it’s about us. Perhaps it’s the degree to which our brains can be hijacked by emotions, causing us to make investment decisions we’ll go on to regret. The excitement regarding Ethereum’s current run up towards IDR 32.9 million (approximately $2,000) can be enticing. Hold on before you dive in, because we need to break down what’s actually happening.

Are You Just Following The Herd?

Herd mentality is a powerful force. We’re herd animals, conditioned to copy the actions of people in our vicinity. When everyone's talking about Ethereum going to the moon, it's tempting to join the party. Ask yourself: are you investing based on your analysis, or because your Twitter feed is screaming "buy, buy, buy!"?

Think of it like this: imagine you're at a restaurant, and everyone's ordering the same dish. And you’d be hard pressed not to order one for yourself even if it seems a little intimidating. You just think that everybody else has key information that you don’t have. That's herd mentality in action. In crypto, it’s exacerbated by the role social media plays in fostering echo chambers of enthusiasm that can leave you dangerously deaf to the underlying risks.

It's easy to fall into the trap. Noticed analysts citing it IDR 32.9 million target? Confirmation bias kicks in. You’re pitching the facts selectively to paint the narrative that Ethereum prices are going sky high. At the same time, you ignore the prospect of a price bubble. The MACD indicator is bullish? Great! RSI is above 50? Fantastic! Where’s the resistance at IDR 30.3 mn? How often are you focused on the downside scenarios?

Loss Aversion Clouding Your Judgement?

Here's another mental trap: loss aversion. Aversion means that we feel the pain of that loss more intensely than any pleasure we gain from an equivalent gain. Remember Sarah? She's probably still holding onto her Ethereum, even though it's below her purchase price, hoping to "break even." Selling now would require her to own up to the fact that she blundered.

This is a prime case of loss aversion. We hold onto our bad bets, hoping they will come back. Even when the facts start to tell a very different story, we inexplicably cling on. This may result in waiting too long to sell an asset thereby losing out on the opportunity to deploy that capital to a better use.

  • Ask yourself: Would you buy Ethereum today at the current price if you didn't already own it? If the answer is no, it's time to reconsider your position.
  • Consider setting stop-loss orders to protect yourself from further losses.
  • Don't let emotions dictate your investment decisions.

The Illusion Of Control Is Dangerous

We think we're in control. We think we understand the market. Yet behavioral economics reminds us that the way our brains are wired blinds us to our own deception. We look for patterns where none exist, inflate our own prowess, and succumb to cognitive failings.

The recent news serves to underscore important support and resistance levels. Analysts recommend careful technical analysis. Good advice to be sure, but no amount of sophisticated analysis can help you look into the future. We all know that crypto is very volatile. Conditions beyond the norm, such as government policies and regulations, can promote or suppress investments and have a significant impact on price. Keep in mind that at the end of the day, even the best models are only as good as the data they’re fed.

Acknowledge your biases. Be aware of your emotional triggers. Seek out dissenting opinions. Question your assumptions. And most importantly, diversify your portfolio. Don’t go all in on the ETH, as appealing as that might be.

The upside to IDR 32.9 million is potential in a way that makes it actually exciting. True financial genius doesn’t lie in running after the next great insider advice. It grows from receiving honest feedback paired with a commitment to do something about it. Take a hard look at your portfolio. What hidden biases are you revealing?