Does anybody else find human psychology intriguing? I'm not a psychologist, not even close. However, I find the structure of market participants interesting. Retail investors make up the largest part of market participation, mainly due to developments within technology and ease of access to the markets. Despite this, they are generally the most financially uneducated participants, and as a result, are more succumb to "following the herd" as it were. The perfect example:
Bitcoin Bull (2017)
October 2017, Bitcoin was trading roughly around $4,200, YouTube guru's popped up everywhere, and every news outlet had stories running about Bitcoin. Retail investors got sucked right into it, ploughing money from their savings, left, right, and centre. I even heard a taxi driver talking about that "bitcoin thingy". Before we knew it, Bitcoin was trading at $20,000 dollars within 2 months, and half of the investors didn't even understand what it was or why it was trading where it was. However, people just followed the crowd and arguably that is what helped push the price up. Unfortunately, the crowd dispersed just as quickly as it amassed and thousands of people saw their savings disappear overnight. Mass panic set in and before you know it, Bitcoin was trading at around $6,000. It all comes down to crowd mentality.
Applying this to the current market and talks about a potential recession. Could it be that this crowd mentality will send us into a premature recession?