How to avoid biases while investing in NFTs?

SNEAK PEEK

  • Investing in the crypto world takes work. At times there are many biases.
  • To avoid those biases, Alex is building and providing certain tendencies and avoidance strategies.
  • The strategies include understanding own methods, not overestimating any investment opportunity and retaining the right amount of information.

Recently, Alex is Building, an NFT writer via Twitter, shared various strategies to cope with individuals’ biases while investing in the NFT or crypto world. Sometimes, individuals must realize their own biased decisions and follow what others are doing. Alex, through its Twitter thread, quoted that various smart venture capitalists effectively invest small amounts with due diligence following the Bandwagon Effect. 

The bandwagon effect creates an expression where individuals see what others are doing as ‘Social Proof’ and get carried away, creating a bias that investors are unaware of. 

To avoid the same, investors should notice what others are doing but create possible barriers while following their path and creating their strategies. Investors, while investing, should focus more on their investment criteria than the momentum through which others are investing. 

Further, the writer also explained the Dunning-Kruger effect bias, where investors overestimate the NFT they know very little about. This effect also creates a moment of bias where investors get very confident with whatever they do while having little knowledge about it. To avoid this bias, one should be honest with themselves and acquire a complete understanding of the NFT in which one invests. While retaining information, one should also be conscious about what they are learning and from which sources they are referring, as it also plays an important role. 

Investing in the crypto world is interesting for beginners, but it also carries its cons and biases. So beware of them and use these avoidance criteria judiciously.