Although difficult and complex to understand, the real reason why people are now interested in Bitcoin and other cryptocurrencies could be much simpler than we can imagine. The simple explanation for this phenomenon is that the interest in cryptocurrencies is based on the fact that everyone else is interested in this phenomenon.
As humans, we are easily tempted to indulge and engage with what everyone around us seems to be doing. Wide media coverage can increase the feeling that we are missing out on something that everyone else is doing, and the more we hear about something like, for example, the virtual currency Bitcoin, the less risky we find to get involved and participate in it. phenomenon. When something starts to get more and more familiar people are more willing to get involved Humans are incredibly influenced by other people in their environment and the only reason some buy Bitcoin is because they think other people value it too and this it becomes a social phenomenon compared to a kind of avalanche that can lead to a self-fulfilling prophecy.
Theory of mind
Even so, only a small number of people end up buying cryptocurrencies. Ralph De Martino co-authored a study that looked at why certain people are more likely to get involved in a bubble market while others stay away. By looking at the areas of the brain that were active while people were playing a trading simulation, De Martino and his team found that the parts of our brain that are responsible for evaluating other people's thoughts and feelings are also active when we made the decision to invest. on an asset that is rapidly increasing in value. The reason for the link, says De Martino, has to do with something called a theory of mind. Humans use the theory of mind to try to understand what another person is thinking and to determine what they might do in the future. This is usually a useful skill, but it seems that people with a greater sense of the theory of mind are also more likely to get involved in a bubble. It may be because they think they can guess what other people will do, and they are stepping into the bubble knowing that other people are likely to follow, which drives up the price and is precisely what seems to have happened in the Bitcoin market and others. cryptocurrencies.
"You can imagine that you can over-interpret the intention of other people," says De Martino. This could be what leads to the bubbles. A group of people thinks that other people are likely to buy a particular asset, so they try to get in there before they do. Other people see this as evidence that the asset is on the rise, so they accept it too, thinking that non-investors are bound to make that decision over time. Very soon, the value of an asset can start to accelerate.
If the Bitcoin bubble collapses, everything you just read is likely to happen in reverse. The herd mentality will shift from buying to selling, and people with a higher theory of mind will sell their Bitcoin, anticipating that other people are about to do the same. But it is not known if, or when, the bubble will burst. The problem with a true bubble in the economy is that we just don't know what a bubble is until it crashes.
In the same way, it must be understood that the phenomenon behind the success of Bitcoin and other of the most prominent cryptocurrencies is that they are decentralized currencies, very complex that, based on the Blockchain blockchain, are stable and generate great reliability.
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