9 Biases That Drain Your Wallet In A Bull Market
The Blockchain Sector @ 2025-06-05
Human psychology is wired for survival not optimal investing. Crypto, being fast paced, volatile, and emotionally charged, magnifies our cognitive biases.
Inspired by ironically by Charlie Munger's work on human misjudgement, here's a tight breakdown of 9 common investor biases, how they affect your trades, and what you can do about it.
1. Confirmation Bias
What it is Favouring info that supports your existing beliefs.
Effect We surround ourselves with likeminded people on social media which creates an echo chamber of aligned views.
Solution Seek out and struggle to understand opposing views deliberately. Ask: "What would make me change my view in the future?"
2. Overconfidence Bias
What it is Thinking you're smarter than the market.
Effect Taking oversized positions, skipping research, or YOLO'ing into rug pulls.
Solution Size your trades based on risk/reward, not conviction. Track your returns honestly and adjust accordingly.
3. Loss Aversion
What it is Feeling the pain of loss twice as strongly as the joy of gain.
Effect Holding losers too long, selling winners too early.
Solution Set long term plans or use predefined stop losses and take profits. Don't let emotion decide.
4. Recency Bias
What it is Giving too much weight to recent events.
Effect FOMO during rallies, panic selling after crashes.
Solution Zoom out. Review long term trends. Don't make decisions based on the last 7 days.
5. Herd Mentality
What it is Following the crowd feels safe, trading against the popular opinion feels stupid.
Effect Buying tops, selling bottoms, getting caught in hype cycles.
Solution Ask yourself, "Am I truly early? Would I buy this if no one else did?"
6. Sunk Cost Fallacy
What it is Justifying staying in a bad trade because you've already invested.
Effect Doubling down on poor decisions to "break even."
Solution Ignore the past. Re evaluate each position as if you were entering it fresh today.
7. Anchoring Bias
What it is Getting fixated on arbitrary numbers (e.g, ATHs, your entry price, whole numbers).
Effect Misjudging value based on irrelevant benchmarks.
Solution Focus on fundamentals and current price action, not past highs.
8. Risk Tolerance Illusion
What it is Believing you're ok with risk until it punches you in the face.
Effect Overexposing early, then panic selling when things get serious.
Solution Understand that risk tolerance shrinks as stakes grow. Start small, scale with confidence and clarity.
9. Ego Attachment
What it is Equating being right with your identity.
Effect Refusing to admit mistakes or cut losses.
Solution Separate your ego from your portfolio. Easier said than done.
While biases hurt, they also highlight a simple truth: the crowd is usually emotional and wrong at extremes.
This is where the opportunity is in crypto markets today.
Bitcoin is working it’s way into a little wedge where we will need to decide if this is going to go exponential like previous bull runs or settle into a supercycle pattern.
This could take the rest of the year to play out and we are only a month or so away from the period in summer where everyone goes sits on a beach and forgets about silly internet money.
ETH/BTC had a little bounce and is now consolidating around 0.025. With it lies hope for Ethereum and the rest of the altcoin markets.
Some levels to keep an eye on are $120k for Bitcoin, a break above this could put things into an accelerated timeline. A break below 62% BTC.D (Bitcoin dominance, currently 64.2%) could signify a longer term adjustment and alt cycle.
Until then we are just 5% from another all time high on Bitcoin. Sentiment and leverage doesn’t reflect that. Room to go higher but I expect a cooling off period and some moderate pain over summer at some point. Hodl.
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