RSI and MACD are great tools for analyzing market momentum. A high RSI (above 70) signals overbought conditions, while a MACD crossover can indicate a change in trend direction, helping traders identify ideal buy or sell moments.
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Large price fluctuations often trigger emotional responses like fear, greed, and uncertainty in investors. During rapid price increases, FOMO (Fear of Missing Out) can drive people to make impulsive purchases, hoping to ride the wave. Conversely, sharp declines can lead to panic selling as investors attempt to cut losses. These swings often lead to a short-term, reactive approach to trading rather than a disciplined, long-term strategy. Over time, extreme volatility can create a more cautious or skeptical mindset, potentially causing investors to hesitate or sit on the sidelines until the market stabilizes.
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Market sentiment plays a huge role in crypto price volatility, as news events and social media trends quickly influence investor behavior. Positive news, like a major exchange listing or institutional adoption, can cause rapid price increases as optimism spreads across platforms. On the flip side, negative events, such as regulatory concerns or security breaches, often trigger sell-offs. Social media amplifies this impact, where influencers and online communities can cause price swings through collective sentiment shifts, making crypto markets especially reactive to news.
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