by Hodler Ash 
What Does Bag Holder Mean In Crypto ?
The people who are new to the crypto world might face a little difficulty in getting on point with the terms of the market specifically because there are a lot of terms that are not used commonly. Apart from that, there are also various terms that are similar for the stock market as well as the crypto market.
Bag holder is one of those terms. What basically bag holder means is a person who has invested in any asset and holds a position in security till the time the value of inestment falls down to zero. If an investor stubbornly wants to retain the coins even though he/she can sense the downfall and actually wait till the time the coin/token goes worthless, he/she would be called a bagholder.
The History Related To The Term Bag Holders
This term definitely did not come out of nowhere but was instead formed back in the times of Great Depression. In those times, people used to be on soup lines holding potato bags filled with whatever little possessions that were left with them. Those people were called bag holders and now the term has emerged into the modern investment lexicon and is widely used in the markets.
Why Does A Person Become Bag Holder ?
As already mentioned, a bagholder is somebody who holds onto his investments till it goes worthless. There might be various reasons for this but one of the most common reasons is the unawareness about the declining value of the stock. The underperforming securities might be held by the investors without even knowing that the securities are actually underperforming. This unawareness has caused a lot of losses to a lot of investors in the past and it’s inevitable until a person is always fully going with trend and checking the values very often.
Many investors also think that selling the investments that are declining in value will acknowledge an initially poor investment decision and that is what they don’t want.
There is also a phenomenon which is called the disposition effect. This is solely dependent on the human psychology. What actually happens is that a lot of investors tend to sell the cryptocurrency coins which are increasing in price while stubbornly retaining the cryptocurrency coins whose prices are going down. The thing about the human psychology is that they hate losing more than they enjoy winning and that is what leads the investors into making such decisions.
Controlling the humanly institutions and going according to the market trends is obviously the most profitable thing one can do after an investment. The prospect theory also comes into play which says that the individuals decide according to the perceived gains, rather than perceived losses. A person would rather just take $50 than take $100 and then lose $50.
What Is Sunk Cost Fallacy ?
The sunk cost fallacy is a big deal which also has the potential to make an investor a bagholder. The sunk cost basically means the unrecoverable expenses that the investor has already done on the specific assets (coins). These are the extra investments that an investor does which they definitely want to get back for which they wait until the price of the coins slingshots back up to the initial price or more. In such times, an investor should definitely think the extra investments as sunk cost and should start considering it permanent, so that they can take better steps ahead.
The unrealised loss are not something that all the investors want to bear without realising that holding on would just delay the inevitable. A financial expert in these kind of situations is very much needed in order to give you the right advices and save the maximum possible amount of your money.
