How brain function affects the rise and fall of bitcoin

    Bitcoin cost is changeable. Two years ago, around the same period, the price of a coin rose to a record $ 1242, but three years ago it was $ 12. Having reached a peak, almost immediately, the price began to decline, and to this day, the virtual currency has not been able to beat its previous records. Coin prices still range from 200-450 dollars per unit.

    Each new round of the cost curve provokes a heightened sense of anxiety in a fair portion of the bitcoin community, since the next jump can destroy their condition in a split second. Following fluctuations in the course, there is always heated discussion about the causes of what is happening. Ponzi shadow schemes? Manipulation of stock magnates? Large investment injections? Strange as it may seem, the answers to these questions can be found in our heads, since each fluctuation in the cost of bitcoin corresponds to the reaction of certain neurons that light up like garlands on a Christmas tree.

    Everything in my head


    Scientists conducted a gigantic research work, analyzing the effects of stock market fluctuations on the human brain and vice versa. Market behavior is the result of collective decision-making by players, and decision-making relates to the field of psychology - therefore, the human brain is responsible for this process. Just like the price of shares, the price of bitcoin depends on collective decisions made by the community.

    According to neuroeconomist Gregory Burns, information and expectations are key concepts in analyzing the relationship between neural activity and market behavior.

    Everything in the head, data on specific facts, data on the risks that we collect - akin to eavesdropping. If we assume that a certain region of the brain is responsible for collecting information from other brain centers and its processing, it can be called a kind of barometer of user expectations. This area can be studied and even assumed, with a high degree of probability, the subsequent actions of its owner.
    - Gregory Burns, neuroeconomist, director of the Center for Neuropolitics at Emory University

    Expectations are formed from the information received, and in accordance with the formed expectations (the upcoming “native” or collapse of the course), a region of the brain called neostriatum goes into action. The neostriatum or striatum is responsible for making decisions, and also has the most extensive network of dopamine receptors, in comparison with other parts of the brain.

    Neuroscience can shed light on the famous peaks and falls of Bitcoin. The number of regular users of Bitcoin is still relatively small, and is comparable with the number of players on the same stock exchange. This statement is true, despite the fact that automated trading bots for selling and buying bitcoins undoubtedly exist and, according to Andrew Barisser, owner of the Bitcoin company Assembly, which launched its own trading bot earlier this year, are popular on some exchanges.

    The smaller the market, or another part of the community, within which decision-making is a determining process, the more results can be obtained from studying the psychological background of events.
    - Gregory Burns

    In the Bitcoin community, the information flow is not too thick ( should we not know - we are writing news about this!), therefore, each new fact is potentially capable of having a serious impact on the formation of user expectations, Burns believes, since based on the history of previous fluctuations in bitcoin prices and the reaction of traders, we can conclude that people cling to every detail, hoping to predict the near future, whether this part is significant or not. Having learned the latest news about investment injections in the bitcoin industry, scandal or hacker attack, the strider of the trader comes into activity, and if the news is optimistic, this area of ​​the brain produces a huge amount of dopamine. At the same time, the scale reflecting the change in the level of dopamine will strongly resemble the growth curve of a virtual coin.

    However, the key concept in each individual case is expectations: optimistic or negative news can have a tremendous impact on the consciousness of network participants if they already have a certain amount of user expectations. If any terrible events occur in the world of bitcoin, the price immediately breaks the lower threshold, but to some this news may seem positive. Everyone who knows how to fall, knows how to rise. It may seem absurd, but that’s how the human brain works.

    All these processes are sometimes not amenable to logical explanation, but the modern economy has long abandoned the hypothesis of a “rational person”: people do not always act logically when it comes to money - or bitcoin

    source.
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