Herd Instinct
Beginner
What Is Herd Instinct?
Herd instinct refers to the tendency of some crypto traders to follow the actions of the majority. This is easy to spot in various market scenarios, such as sudden buying sprees during market rallies or panic selling during market downturns. Herd instinct is particularly common in times of uncertainty or volatility.
How Does Herd Instinct Work?
At its core, herd instinct originates from the human desire to be part of a group. In the context of cryptocurrency markets, many traders tend to use the actions of other market participants as a reference. It can lead to a cycle of reinforcement, where the more people buy or sell a particular cryptocurrency, the more others feel compelled to do the same.