Animal Spirits is a term used in economics to describe the irrational and emotional behaviors of investors. It was coined by John Maynard Keynes, one of the most influential economists of the twentieth century. The concept was developed as part of his theory that economic decisions are driven not just by rational analyses but also by psychological factors such as fear, euphoria and herd mentality. In other words, Animal Spirits can be thought of as an invisible force that drives investor sentiment and decision-making.
In recent years, Animal Spirits has been applied more broadly to financial markets in general – including cryptocurrency markets – where irrational behavior due to emotion or “herd mentality” can have a significant impact on prices. The 2008 financial crisis is often cited as an example of how animal spirits can drive market movements in stocks and bonds, leading to rapid changes in asset values across entire economies.
The application of this concept to cryptocurrency markets is especially important because these markets are relatively new and highly volatile compared to traditional stock exchanges. Many investors are still unfamiliar with cryptocurrencies and lack knowledge about how they work or what strategies may be effective for trading them successfully over time; this means that emotions like fear or greed could easily lead traders into bad investments or worse yet manipulation schemes perpetrated by large players (such as whales). As such, it’s important for investors interested in cryptocurrencies understand Animal Spirits so they can make better informed investment decisions when trading these assets online through exchanges like Coinbase Pro & Binance etc..
Fortunately there are several ways for users to protect themselves against potential losses caused by irrational behavior within the crypto space:
1) Educate yourself – Make sure you understand blockchain technology & digital currencies before investing any money into them; read up on resources available online from reliable sources such as CoinMarketCap Academy which provides free educational materials on various topics related to cryptocurrencies & blockchain technology
2) Monitor news feeds – Pay attention to news feeds related both inside & outside the crypto world so you don’t get caught off guard if something unexpected happens
3) Diversify your portfolio – Don’t put all your eggs into one basket; diversifying your holdings between different coins/assets will help spread out risk associated with market volatility
4) Use stop loss orders – Setting up buy/sell limit orders ahead of time helps reduce losses when prices move too far away from expected levels quickly
