What others say, think and do affects our attitudes and behaviors. Social norms are the set of rules and standards perceived by people in society that direct their behavior even without any influence. It is divided into two as imperative and descriptive by Robert Cialdini and his colleagues. While injunctive social norms refer to the perception of behaviors that are approved or disapproved by individuals in society, descriptive social norms characterize the perception of typical behaviors performed by individuals in society. So while injunctive social norms tell us what behavior should be done (no litter should be thrown on the ground), descriptive social norms tell us what others are doing (you see there is a lot of litter on the ground).
The strength of social norms is affected by the personality characteristics of individuals (some people are more likely to comply with the norms), their reference groups, their social environment, the size of the group they are in, the salience of the norm, and the importance of the situation and the group for the person. The more the relevant norm is internalized by the person, the more likely it is to influence behavior.
Rather than being deceived alone, we should be deceived together with everyone else.
When considered in the context of cryptocurrencies and phenomena, a newcomer to the industry thinks that the people everyone follows are experts in this field. Based on the idea that “If everyone follows/gets what they say, there must be a logic to it, otherwise they should have unfollowed already”, people can access information (which coin to buy) in a very short time, perhaps by reading a single tweet. In other words, we base our own behavior on the behavior of others. We prefer to be deceived together with everyone else rather than being deceived alone. Moreover, from an evolutionary perspective, moving in a different direction from the group (not buying a coin that everyone else is buying) is cognitively very challenging because the cost of making a mistake is quite high. While others are winning, you may lose or remain stagnant. You may regret not buying with them and start making riskier decisions.
Can we escape social norms?
In order to avoid the existing influence of social norms, you should completely isolate yourself from the outside world, not communicate with anyone, not use any social media platforms and not follow any news sites. As can be seen from the extreme examples given, it does not seem very realistic to be able to avoid the influence of social norms. The important thing to think about is which norms we allow to influence us. If you have no knowledge on a subject, at this stage any information may seem correct to you, so everything that comes from outside is open to influencing you. On the other hand, if you improve yourself and read about topics such as finance, psychology, mass behavior, behavioral economics, media literacy, and increase your knowledge, you will begin to understand more or less what can be right and what can be wrong.
The crypto market’s close relationship with the media
Media literacy is especially important because there is a lot of misinformation and news circulating both on social media and on the internet. For example, there is a lot of “FUD” spread in the crypto industry. FUD (Fear, Uncertainty, Doubt) refers to positive or negative news that is sometimes presented to manipulate the markets and sometimes to deceive people. For example, in 2014 Mt. Gox exchange had their Bitcoins stolen (both their own and the users’) due to a major security breach, Elon Musk’s tweets about cryptocurrencies in the 2020 bull, and the news that Bitcoin ETFs were approved in 2024. Even if we do not believe this news, it affects our investment decisions like everyone else. Therefore, during periods when FUD news spreads, markets may experience extreme price fluctuations, transaction volumes may decrease, and investors’ confidence in the markets may decrease. No one wants to take risky actions in an environment where there is a lot of uncertainty, where they can be deceived or constantly lose money. On the other hand, by increasing your media literacy and financial knowledge, you can also learn which news to take and what action to take. You can make profits from sudden price changes in this way, which is called News Trading.
Phenomenons that pump ‘FOMO’
In summary, even if the comments commonly seen in our environment do not seem convincing to us, they can affect our cognitive sensitivity and affect our investment decisions, causing us to suffer from FOMO (fear of missing out). For example, imagine your friend recommends you a coin and says it will increase 10x with the announcement next month. How do you proceed at this point? At worst, many people will prefer to throw away half or part of the money they would normally invest in a coin, because the possibility of the relevant event occurring remains in the back of our minds. Let’s explain this situation with a theory from evolutionary psychology in our next article.
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