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New investors also suffer from unit bias, mistakenly believing they can’t afford significant investments in Bitcoin, thus directing most of their funds to altcoins with smaller price points. A robust narrative associated with popular altcoins, like XRP's partnerships with banks or Cardano's academic backing, often drives interest and investment.
The Cycle of Emotions: Fear and Greed
Investing in cryptocurrencies evokes extreme emotional responses. The volatility often leads investors to panic sell when prices dip, triggering a cascade of selling that can push prices even lower. This dynamic creates a feedback loop, where fear begets further fear, resulting in dramatic drops.