In the early morning, BTC retreated rapidly from 60k to 58k. The volatility of the secondary market often scares many people. The greater the volatility, the greater the fear. Therefore, people often like the so-called "stable" market with low volatility, and naturally hate the market with huge volatility, such as the crypto market.
The complexity of the financial market lies in the fact that a single variable - price - eclipses all the mathematics of mankind. To date, the debate on whether price fluctuations are memoryless random processes or memory-based non-random processes has not yet been resolved.
Jiaolian believes that the reason why prices are so mysterious and complex is that they are ternary, consisting of three possibilities: rising, falling, and sideways, rather than binary. Duality is common in the macroscopic real world: yin and yang, black and white, existence and non-existence, male and female, life and death, switch, etc.
In quantum mechanics, the three-dimensionality begins to emerge: Schrödinger's cat can be alive, can die, or can be neither alive nor dead.
Prices, like the cat, can go up, go down, or stay the same.
It is this triadic nature of prices that makes financial markets complex and unpredictable.
In Dream of the Red Chamber, Lin Daiyu said that either the east wind will prevail over the west wind, or the west wind will prevail over the east wind. This is the perspective of dualism . Is it possible that the east wind and the west wind are evenly matched, neither can prevail over the other, or that the two sides are pulling back and forth near the equilibrium point? This is the perspective of game theory.
The decentralization of BTC relies on the construction of a sophisticated game structure, which allows multiple participants to check and balance each other at any level, so that no one can overwhelm others, dominate, and control the entire system.
The sideways price movement is a state where the long and short sides are evenly matched. In this state of equilibrium, the longs cannot decisively overwhelm the shorts, thus forming a decisive upward breakthrough; nor can the shorts decisively overwhelm the longs, thus forming a decisive downward breakthrough. Therefore, the price moves sideways.
The so-called sideways movement does not mean that the price remains motionless, but that the price fluctuates slightly over a considerable period of time, remaining within a range without any significant upward or downward trend.
As the market rises, bulls overwhelm bears, and continued buying drives prices higher. Investors are filled with optimism. Emotions drive investors to continue buying, creating a positive feedback loop that drives prices higher.
In a downtrend, bears overwhelm bulls, and continued selling drives prices down. Pessimism is rampant among investors. Emotions push investors to continue selling, creating a positive feedback loop that drives prices down.
In a sideways market, the efforts of either the long or short side are unable to promote a positive feedback loop. The power of the other side is enough to stop any trend from occurring, thus forming a negative feedback loop.
At this time, the price is in a relatively restricted range. Due to the uncertainty of direction, short-term speculative operations become difficult to make profits. The sideways market is often regarded as a state of "uncertainty" or "waiting for a breakthrough". People often face more confusion in this market because there is a lack of obvious upward or downward signals.
It is difficult for people to choose the right strategy. After repeated fluctuations and unsuccessful breakthroughs, people become numb and ignore or miss the real breakthrough trend when it comes. People feel uncertain and anxious, which puts them under great psychological pressure. This pressure often makes people who have withstood the excitement of a surge or the fear of a plunge give up and leave the market too early, missing out on the market outlook or being caught off guard by a sudden breakthrough.
The triadic nature of prices causes those caught up in it to swing back and forth between optimism, panic and uncertainty, thus constituting the market's overall complex and chaotic behavior.
People cannot accurately measure and grasp the behavior of the market, so they argue endlessly about whether it is random.
The Heiner model points out that completely rational behavior has no pattern and is unpredictable. In the eyes of a Thanksgiving turkey, human behavior seems random, unpredictable, and frightening. However, killing a turkey on Thanksgiving is a completely rational and deterministic thing for humans.
Therefore, investors who can cross the cycle are no longer as ignorant as a turkey, but are closer to human rationality.
