The ‘WAGMI’ mentality is undermining crypto

The ‘WAGMI’ mentality is undermining crypto

In 2021, the world witnessed a surge in blockchain-based nonfungible tokens (NFTs), with some enthusiasts comparing them to the emergence of 10 new Disneys or the next 20 Picassos. The market’s exorbitant valuations for NFTs at that time reflected a strong belief in various projects. However, fast forward two years, and these hyped “next Disneys” have largely failed to live up to expectations. This disappointment has led to significant frustration and disillusionment among both investors and enthusiasts.

While project failures are often attributed to founders, it’s important to recognize that the ecosystem’s participants in Web3 have also played a significant role. Greed, anxiety, and irrationality have been prevalent among those involved in this space, contributing to the challenges faced by the NFT and blockchain market.

One factor contributing to the disappointment is the greed-driven behavior in the market. To illustrate this, consider a scenario where tickets to a party are initially priced at $100. Someone who misses the initial sale and buys a ticket in the secondary market for $500 is likely to have heightened expectations. However, since the event was originally designed to offer a $100 experience, the reality often falls short of these elevated expectations. In the crypto market, similar frustrations arise when individuals pay significantly more for NFTs than their initial value. It’s crucial to align expectations with the asset’s original price, especially given the decline in Web3 royalties, which also affects founders’ benefits from secondary sales.

Anchoring bias plays a role in this phenomenon, where individuals fixate on the first price they see, heavily influencing their later decisions and perceptions. Consequently, buyers may view the high price they paid for NFTs as an “anchor” for their expectations, leading to a cycle of disappointment.

Anxiety is another factor that negatively impacts the ecosystem. Quality product development takes time, but the market often expects rapid progress. This puts immense pressure on builders and founders, who feel compelled to make continuous announcements to satisfy the community’s desire for constant stimulation and progress. Unrealistic expectations for quick results can lead to hasty decisions and token dumps when progress doesn’t match the timeline, creating a volatile environment that affects the mental well-being of project founders.

Furthermore, irrationality is prevalent in the market. While studies show that roughly 75% of venture-backed startups fail, NFT collections operate in similarly risky and experimental environments. However, many participants overlook these risks and expect indefinite success and growth. Confirmation bias, the tendency to emphasize information that aligns with existing beliefs while ignoring contradictory evidence, contributes to this behavior. During the previous bull run, the phrase “WAGMI” (We’re all going to make it) epitomized this over-optimistic sentiment. In reality, a market driven by buying and selling involves winners and losers, and the presence of low financial literacy and heightened anxiety can lead to emotionally driven decisions rather than rational analysis.

On a positive note, the Web3 ecosystem has evolved since 2021. Successful projects that adapted to market changes and context are becoming more apparent, and many founders have matured and focused on delivering value. However, the ecosystem’s overall maturity remains crucial. While strong leadership is essential, it alone cannot fix the issues stemming from excessive greed, anxiety, and irrationality. Investors should consider these factors as they enter the next bull run and strive to improve both financially and personally.

FAQs:

What is Web3, and how does it relate to NFTs and blockchain?

Web3 refers to a vision of a decentralized internet where blockchain technology plays a central role in enabling peer-to-peer interactions and ownership of digital assets. NFTs (nonfungible tokens) are a specific application of blockchain technology used to represent ownership of unique digital items, and they have gained prominence within the Web3 ecosystem.

What is anchoring bias, and how does it affect NFT purchases?

Anchoring bias is a cognitive bias where individuals place undue emphasis on the first piece of information they encounter when making decisions. In the context of NFT purchases, it means that buyers may fixate on the initial high price they see for an NFT, leading to unrealistic expectations regarding its utility and potential value.

How does anxiety affect the development of Web3 projects?

Anxiety in the Web3 space often leads to unrealistic expectations for rapid progress. Builders and founders may feel pressured to continually announce updates to satisfy the community’s desire for constant stimulation and progress, which can have negative effects on their mental well-being and the project’s development timeline.

What role does confirmation bias play in the NFT and blockchain market?

Confirmation bias is the tendency to give more weight to information that aligns with one’s existing beliefs and preferences while disregarding contradictory evidence. In the NFT and blockchain market, this bias can lead to an overemphasis on positive news and an underestimation of the risks and challenges associated with projects, contributing to irrational behavior.

What lessons can investors take away from the challenges faced by the NFT and blockchain market?

Investors should consider the impact of greed, anxiety, and irrationality on their decision-making in the market. It’s essential to manage expectations, conduct thorough research, and focus on the long-term viability of projects rather than short-term gains. Additionally, financial and personal growth should be pursued alongside investments in the Web3 ecosystem to make informed decisions and navigate market dynamics effectively.

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About Victor Dsouza

Victor Dsouza is Crypto Journalist. He is keen to write about crypto tokens, crypto presale, you can follow him on twitter and LinkedIn.

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