Cryptocurrency And Your Emotions

The mood in cryptocurrency markets is increasingly being compared to the craze for dotcom companies at the turn of the century. When that mania subsided, companies without a business model and with multi-million dollar valuations went bankrupt. 

The situation in cryptocurrency markets is not dissimilar. Not much is known about the overwhelming majority of 1,000 + coins available in the markets today but they are still being bid up to multi-billion dollar valuations. 

Background: Cryptocurrency

Decentralized digital currencies, such as Bitcoin, utilize cryptography and a public transaction ledger, known as a block chain, to ensure the security of peer-to-peer transactions. The Bitcoin block chain, for example, contains a record of every Bitcoin transaction since the currency's initiation in 2009. Sharing of this block chain occurs across the network so that every user with Bitcoin software can verify the past and current balance of every other Bitcoin user account on the network. Secure cryptographic methods protect the validity and the order of transactions in time within the block chain, ensuring that all Bitcoin accounts are accurate and current.

The transfer of bitcoins or another cryptocurrency from one user to another is also cryptographically protected. When a user sends bitcoins, a secret piece of data called a private key, which is known only to the user, adds a cryptographic signature to the transaction, proving to the rest of the network that the user authorized the transaction. The cryptographic signature also protects transactions from future alteration. Once a user initiates a transaction, the details begin broadcasting across the network. Before the transaction can be finalized in the block chain, however, other users on the network must complete a confirmation process known as mining.

Cryptocurrency Survival 

Owning an asset that's been called both a fraud and the future can be an emotionally intense experience.

When bitcoin lost 30 percent of its value on Dec. 22, for example, one post on Reddit read: "I just re-financed my house to get in. I'm freaking out." Another user offered support to the frantic: "If anyone's actually depressed or suicidal, come to....http...com. We love to listen and talk there."

Financial decision-making is among the most stressful processes out there. And, when it comes to high-risk, high-reward investments, an investor may go through a roller coaster of emotions. But those emotional peaks can be followed by deep troughs, particularly when considering a relatively new product whose value may whiplash. There’s also the fear of missing out and the hindsight effect of selling too early or too soon.

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Here are three steps you can take to help you lower your anxiety when considering investing in cryptocurrencies.