Overconfidence Bias in Crypto Trading Raises Risk of Larger Losses

After a handful of winning trades, many crypto investors begin to believe they have a special ability to “read the market.” But behavioral economists warn that past success can quickly morph into dangerous ‘overconfidence’—a mindset that often leads traders to scale up positions, increase leverage, and loosen risk controls just as market conditions are about to shift.

The phenomenon is widely known as ‘overconfidence bias’, a cognitive distortion in which individuals overestimate their skill, information, or predictive power. In crypto—where sharp rallies can make almost any long exposure…  Read more

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