4 ms·
What is the psychological phenomenon called for when an asset prefers nice round numbers?
by daenz 4y ago
What is the psychological phenomenon called for when an asset prefers nice round numbers?
- adharmad 4y agoRound number bias?
- im3w1l 4y agoSupport if it's being approached from above, and resistance if it's being approached from below. https://www.investopedia.com/trading/support-and-resistance-basics/ https://www.investopedia.com/trading/support-and-resistance-...
- daenz 4y agoThank you! It's incredible how once BTC lost the $20k support, it fell down to the next nice round significant-ish number, ~$19k. The psychology of this seems to be very powerful.
- davidgerard 4y agoOP here. Per the article, it's not "psychology" - it's a whole lot of borrowing on the defi markets that will automatically be liquidated if the number goes too low. You could actually watch these guys in real time, pumping scarce actual-dollars into the market to pump the price. And then sellers dumping directly into the pump. "Thanks for the exit liquidity!"
- TedDoesntTalk 4y agoI don’t understand why the dumpers need the pumpers’ actual-dollars to dump. I thought, when you sell on an exchange, the exchange is obligated to give you actual-dollars no matter what?
- davidgerard 4y agothe dumpers didn't want the price going under $20k either, but they did want the ~$20k
- volkk 4y agoit has less to do with that and more to do with forced liquidation numbers
- cal85 4y agoPeople set up automatic sell orders for when a thing falls below X. And people generally prefer round numbers, for reasons that are not very mysterious.
- Redoubts 4y agoBTC is about to hit new levels of support ;)
- netsharc 4y agoMaybe something like thresholditis. People would say "If it hits 20K I'll sell" and a set of other people think "If it hits 20K I'll buy" so it fluctuates around 20K...
- hermitcrab 4y agoPossibly: https://en.wikipedia.org/wiki/Benford%27s_law https://en.wikipedia.org/wiki/Benford%27s_law
- jeffbee 4y agoWould love to know because all instruments behave this way. There's tons of action in S&P 500 options at, say, 3650, but there's no action at 3640 and 3660 even though those strikes technically exist.
- IAmGraydon 4y agoAssets don't prefer anything. The people placing orders have a bias for round numbers. Why? For one, it's just human psychology to round. Second, liquidity is good at those levels, amplifying the effect.
- 323 4y agoFun fact: some HFT algos utilize this fact, if they see a "round size" order (1000 shares) at a "round price" (11.25) they flag it as a "human" order.
- moneywoes 4y agoBrilliant, any other good resources?
- rsynnott 4y agoThat's not the only thing going on here. There was a strong belief amongst the bitcoin faithful that Bitcoin's price could not fall below the peak of the previous bubble (this made no sense, of course, and required selective viewing of the price history to believe in the first place...)