The post Prospect Theory May Explain Bitcoin Panic Selling Amid Scam Claims appeared on BitcoinEthereumNews.com.

Shanaka Perera challenges the notion of Bitcoin as a scam by applying prospect theory, which explains why investors panic sell during price drops. This psychological framework highlights how fear of losses drives irrational behavior, impacting Bitcoin’s market reputation and stability. Prospect theory reveals investor biases in Bitcoin markets, turning perceived scams into self-fulfilling prophecies through panic selling. Price declines trigger heightened loss aversion, leading to widespread selling that exacerbates volatility. According to market data, Bitcoin experienced a 20% drop in early 2025, correlating with increased scam narrative discussions on social platforms. Discover how Shanaka Perera uses prospect theory to debunk Bitcoin scam myths and understand panic selling. Gain insights into investor psychology for smarter crypto strategies—read now for essential market analysis. What Is Prospect Theory and How Does It Apply to Bitcoin Scam Claims? Prospect theory, developed by psychologists Daniel Kahneman and Amos Tversky, describes how people make decisions under risk, emphasizing loss aversion over gains. In the context of Bitcoin scam claims, Shanaka Perera applies this theory to explain why investors react dramatically to price decreases, often labeling the asset a scam. This framework shows that the fear of losses amplifies negative perceptions, leading to panic selling that further depresses prices and perpetuates the scam narrative. How Does Panic Selling Influence Bitcoin’s Market Behavior? Panic selling occurs when investors, influenced by prospect theory’s loss aversion principle, rush to sell assets during downturns to avoid further losses, even if it means realizing smaller gains or bigger losses elsewhere. Shanaka Perera, a prominent crypto commentator, argues that this behavior is not evidence of Bitcoin being a scam but a psychological response to volatility. For instance, during the 2022 market crash, Bitcoin’s price fell over 70%, triggering mass sell-offs as per reports from financial analysts at Bloomberg. Perera notes, “Investors weigh potential…

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Filed under: News - @ December 19, 2025 1:22 am