Description: A negative feedback loop in blockchain refers to a phenomenon where a decrease in the value of a digital asset triggers a series of chain reactions that further exacerbate its price drop. This process can begin when investors, observing a significant decline in the value of a cryptocurrency, decide to sell their assets to avoid greater losses. This mass selling creates additional pressure on the price, which in turn leads more investors to panic and sell, creating a vicious cycle of devaluation. This type of feedback is particularly relevant in volatile markets, such as cryptocurrencies, where emotions and speculation play a crucial role in decision-making. The decentralized nature of cryptocurrencies and the lack of regulation in many cases can intensify these effects, as there are no stabilization mechanisms to halt the decline. In this context, the negative feedback loop becomes a critical factor that can affect investor confidence and the overall stability of the market.
