Herd Behaviour

What Is Herd Behaviour?

Herd behaviour is a psychological phenomenon where humans find comfort in following the herd and ‘doing what everyone else is doing’. In a cryptocurrency context, herd behaviour means that some traders follow the herd and feel good about that due to cognitive biases, such as ‘If everyone is doing it this way, there is no way they are all wrong’.

Herd behaviour can be detrimental to a trader’s decision-making process, as it can lend a false sense of security and discourage them from doing their own research and following more appropriate market indicators, such as tokenomics. For instance, herd behaviour may cause a trader to purchase a specific asset they would not have considered purchasing otherwise.

Key Takeaway

Herd behaviour is a psychological phenomenon that occurs when market participants ‘follow the herd’ in their dealings, making decisions that are influenced by the collective decisions of other traders.

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