If we want to see the cryptocurrencies follow a certain stable trend we must behave as negative feedback traders.
- What does that mean?
Negative feedback traders are those people who sell when the prices go up and buy when the prices go down.
- Isn't that what most people do?
Not really, there are a lot of people who panic when the prices fall and start selling their cryptocurrencies and when the price rises again they start to buy (Positive feedback traders). In the case that prices are falling, when people sell their cryptocurrencies for fear that they will lower even more, the only thing they are generating is that they pronounce even more the fall in price.
- What is the advantage of having a market with negative feedback traders?
In that case, the equilibrium could be re-established whenever the prices soar up or down. We must have our own strategies, not always follow the mass opinion. If everyone took the same decitions there would be huge liquidity problems in the market.