Efficient Market Hypothesis (EMH)

The Efficient Market Hypothesis (EMH) fundamentally states that the prices of investment securities, such as stocks, already consider all available information regarding those securities. If so, no amount of study will be able to give you the upper hand over “the market.”

Investors need not be logical; according to EMH, each investor will behave arbitrarily. However, the market is always “correct” overall. Simple logic dictates that “efficient” implies “normal.”

For instance, an abnormal response to a strange piece of information is typical. It’s typical for you to follow the herd if they suddenly begin moving in that direction, even if there isn’t a good reason to.

Speaking of the cryptocurrency sector, it is generally known that Bitcoin and other cryptocurrencies react negatively to specific market occurrences, such as exchange hacks or sudden regulatory changes. According to this perspective, the crypto market is very effective since prices instantly reflect readily available real-world information.

There are disadvantages when it comes to agreements between market participants, but Bitcoin’s exposure is continually expanding. Today, Bitcoin had rock-solid fundamentals and all the elements of an efficient market thanks to the supply rate halving last year, protocol updates, increased acceptance, and more use cases than ever.

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