Why do we blindly believe in crypto phenomena? Experts answered.

Do you think that the stakeholders of the crypto market are only crypto exchanges or very popular blockchain projects? If so, it is quite possible to assume that you are new to this market. Indeed, every type of cryptocurrency that is newly launched in the market, regardless of whether it promises a future or is completely empty, is reaching a wide audience through crypto influencers with thousands of followers on social media. In other words, one of the arteries of the crypto market is constituted by these crypto influencers.

These crypto phenomena, appealing to a wide audience, can easily market newly emerged and obscure crypto projects to their followers. The followers, who see the words of these phenomena as invaluable, prefer to invest in these projects without questioning and by completely submitting. The project that thousands of followers flock to at once is presented by the phenomena as the "business of the future." The result? These projects, following the "fill and drain" tactic, quickly drop below their pre-sale value, losing nearly 100% of their value, and it is the small investors who suffer.

Knowing full well

However, the mentioned scams, which can now be regarded as a characteristic of the crypto market, are being swept under the rug as these phenomena reappear in a very short time and provide new investment advice. The followers who have suffered losses continue to follow these phenomenon accounts and moreover, they cannot refrain from investing money in the new "projects" that are marketed to them.

So, why do we willingly believe in these phenomena? As Coinkolik, we are examining this sociological dilemma faced by industry stakeholders by asking experts.

"Instead of accepting, the damages are only growing"

"The view that investors who have suffered losses due to past misguidance still take these phenomena seriously is actually somewhat related to their difficulty in accepting the existing losses and mistakes they made, as well as the expectation of compensating for it," argues Dr. Naim Çetintürk, a faculty member at İstinye University. Çetintürk states that the psychological state known as "Sunk Cost Fallacy" scientifically explains this situation, and continues: "The fundamental reason for this situation is the tendency to not want to give up because a lot of money has been spent, and the wish that things might improve because a lot of effort has been put in. However, in some cases, this situation can lead to further losses instead of accepting the loss and limiting it, resulting in an even greater loss due to this expectation."

"The main motif of social media influencers is to demonstrate earning money easily," says Psychologist Prof. Dr. Acar Baltaş, adding: "These individuals, who use impulsive messages and play on pleasure, can thus instantly motivate their followers."

The two biggest characteristics of scammers

We are asking how figures who previously marketed fraudulent projects to Baltaş are still attracting attention. "Fraudsters have two main characteristics: They appear sympathetic and believe the lies they tell themselves. The figures you mentioned also use this algorithm: By constantly promising profits to their followers, they can easily attract the interest of anyone, regardless of their education level," says Baltaş.

"Triggers the desire for approval and fear of exclusion"

We are asking Baltaş, the author of the book The Punishment of Foolish Emotions is Paid by Decisions, how effective the herd psychology is in this regard. Baltaş states, "It is very common to encounter situations where people continue to support despite knowing they are wrong. The large number of people, the promises made, and the atmosphere created facilitate the herd effect." He adds, "The behavior of conforming to the herd is rooted in the fact that humans are social beings. The group dynamics arising from being a social being trigger the desire to be liked and the fear of being excluded in human psychology."

"Investors watch each other and make their choices accordingly"

Baltaş, stating that adaptation to the community and moving together with everyone is also valid for decisions in the financial field, says, "There is a reality that every investor stepping into the financial markets knows" and continues: "When everyone buys, sell; when everyone sells, buy. This principle, which seems extremely simple, is almost impossible to apply due to psychological mechanisms. Because investors observe each other and make their preferences by looking at other investors."

"There is risk, but no one wants to fall behind their competitor"

In his column in Hürriyet, journalist Erdal Sağlam referenced an article he wrote about 10 years ago. Baltaş stated, "This is a very good example of the situation: 'Everyone sees the risks, but no one wants to fall behind their competitors. While a profit frenzy is underway, they cannot refrain from participating. Indifference will incur a heavy price, but the mentality of 'while things are going this way, let's also profit, and when it worsens, we will find a way to profit again' prevails. If anyone looks at the references, they will see that this economic assessment was made in 2014 and that not much has changed in the past 10 years."

Dr. Naim Çetintürk, who evaluates the topic of herd psychology, looks at it from a different perspective: "I think that beyond the herd psychology referred to as 'herd behaviour', it is an important parameter that individuals in this field are assessed as 'authorities' due to their high number of followers without their financial competence being fully questioned."

The desire to validate expectations and wishes

Another issue that should be emphasized is the "confirmation bias" in the literature, which suggests the desire of individuals to validate their expectations and desires. Çetintürk states, "Especially for investors who wish to achieve high returns in a short period, their belief in phenomena that tell them such information, sometimes presenting unverified profit stories, and sometimes following them blindly, is also for this reason."

So what about high inflation? In countries struggling with high inflation, especially Argentina and Turkey, there is a significant interest in crypto. Therefore, could the perception of risk here be exacerbated by inflation? Prof. Dr. Acar Baltaş states, "The impact of inflation on this corruption is indeed very significant: However, when you look at the history of the Turkish economy, the inflation rate has mostly been very high. There will be no improvement as long as the masses do not suffer."

"Politicians love to give hope and prolong the situation: 'Inflation will decrease next month, you can't guess it will drop in two months..." Baltaş adds: "Every society is managed properly."

This article does not contain investment advice or recommendations. Every investment and trading action carries risks, and readers should conduct their own research when making decisions.