Loss aversion: Losses are avoided more than equivalent gains are sought. In their 1992 paper, Kahneman and Tversky found the median coefficient of loss aversion to be about 2.25, i.e., losses hurt about 2.25 times more than equivalent gains reward.
[This devloped as an evolutionary mechanism to prevent death and reduce our risk taking , for instance we can stay without food for some days but will die if we consume something poisonous.]
To answer why people don’t usually exit market before the Crash , I surveyed 23 of my friends and family (and some of their friends) who invest in Crypto and this was the findings .
8/23 are the OG investors who are here from the cycles before ( 7 from 2017 and 1 from 2013 ).
Rest 15/23 are the new investors from this cycle .
5/23 didn’t know about the halving cycles and weren’t expecting a crash at all.
18/23 knew either completely or had a partial knowledge that BTC crashes hard after it’s peak .
Now for the exit strategies of these people .
5/23 are long term hodlers
4/23 have an exit strategy in mind and will slowly take the money out after they reach their goal.
2/23 said they’ll liquefy their complete portfolio at 90k because selling pressure will be huge when BTC reach 100k (and even at 90k they would have tripled – quadrupled their investment)
So basically 11/23 had their exist strategy laid out .
These people are the ones who don’t loose their money and exit the bull run with profit.
Now for the remaining 12 /23 said they said they will remove their money at the peak or around it.
To them I questioned when and how much they are expecting the peak to be.
6/23 said they don’t know or how would they know (this made some of them realise my point)
4/23 said between 100-200k BTC
2/23 said between 300-500k BTC
The problem is if around half of the population investing in crypto expects to take the money out around the peak , they are risking a lot . They are not realising that how fast the market can crash , or that it can even crash while they are asleep .
# They take these risks just Because they Can’t realise the risks involved and the looses they may experience.
# Losses hurt more only after experiencing it .
I think people should lay down a proper exit strategy , DCA money out of the market slowly , this prevents the risk as well as the frustration of missing out .
This time the people investing in crypto is far greater than in 2017 and after the crash the stress people experience either mental or financial both can be taxing enough to shake their lives , jobs , relationships and can put them in a bad position !!
So please DYOR , spread the word to have an exit strategy , and educate your folks investing in crypto about the basics of halving cycle and the potential risks of 70-80 percentage crash with long bear markets and accumulation phase !!!
And also let them know the most basic thing of the market to buy red ♥️ and sell green 💚
Source of loss aversion theory – Tversky, Amos; Kahneman, Daniel (1992). “Advances in Prospect Theory: Cumulative Representation of Uncertaintly”. Journal of Risk and Uncertainty. 5 (4): 297–323. doi:10.1007/BF00122574. ISSN 0895-5646. S2CID 8456150.Abstract.
Location of survey – India
Average age of people surveyed – 32.5 years
Average Socioeconomic Economic status – upper middle class.
Repost: because I missed asking the participants of survey to post it.
[Loss Aversion Graph](https://imgur.com/a/hZoTRcY)
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