FOMO, or “fear of missing out,” refers to the feeling of anxiety or insecurity that can arise when we believe that others are having experiences that we are not. It is often associated with social media and the constant stream of information that it provides about the activities and experiences of others. In the context of crypto specifically what you are missing out on is making money. A lorra money.
You know the feeling.
You’re scrolling through your social media feed and you see all your crypto-obsessed friends raving about the latest and greatest initial coin offering, or boasting about the amazing returns they’ve made on their digital asset investments. You’ve often wondered why is cryptocurrency worth anything, to begin with. You start to feel that creeping feeling of anxiety that you might be missing out on something huge. Before you know it, you’re frantically Googling how to buy that particular coin.
Sound familiar? If it does, you’re not alone. FOMO is a major driving force for many crypto traders.
While it can be tempting to chase after the latest hot coin it’s important to remember that FOMO can also lead to bad investment decisions.
1. How FOMO Affects Crypto Traders and Investors
The influence of social media on FOMO can’t be understated. With everyone from Elon Musk to your neighbor’s cousin’s college roommate weighing in on the latest crypto coin, it’s easy to feel like you are missing out on getting rich.
But it’s important to remember that just because something is trending on social media, it doesn’t necessarily mean it’s a good investment. In fact, the hype and FOMO surrounding certain coins can often lead to artificially inflated prices and unrealistic expectations.
Some FOMO examples
For example, look no further than the DeFi summer and DeFi 2.0. Remember the likes of $TIME Wonderland and Olympus DAO that were offering outrageous yields? Or the pumps and dumps of Dogecoin, Shiba Inu, and the rest of the meme coins? Or more recently the frenzy for coins promoted by controversial personalities like Richard Heart’s HEX?
2. How do I know if I am experiencing FOMO
Here are some signs that you may be experiencing FOMO in your trading or investing:
- You feel anxious or urgently interested in a particular coin or trading opportunity, without taking the time to really understand it.
- You are swayed by the hype or opinions of others, rather than making investment decisions based on your own research and analysis.
- You are tempted to make impulsive trades based on a fear of missing out on a potentially lucrative opportunity.
If you are experiencing any of these signs, it’s important to take a step back and consider whether you are making decisions based on FOMO or on your own analysis. It can be helpful to set personal rules for yourself, such as only investing a certain percentage of your portfolio in high-risk assets or never making a trade based solely on FOMO, to help you avoid falling victim to the dangers of FOMO in your trading and investing.
Let’s take a closer look at how you can avoid falling victim to the crypto FOMO trap.
3. How to Avoid FOMO in the Crypto Market
i. DYOR: Do Your Own Research
First and foremost, it’s crucial to do your own research and due diligence before making any investment decisions.
This means taking the time to understand the underlying technology of a particular coin and examining its past performance.
ii. Trade on momentum to take advantage of other’s FOMO
Doing your own research is easier said than done. If everyone is posting bullish Tweets and you keep seeing YouTube videos talking about coins going to the moon you are bound to get a real taste of FOMO. Typically all these videos will say something like, “This is not financial advise and do your own research.” And then they will tell you why you are missing out on some massive opportunity you are missing out on.
Doing your own research implies you should look at the fundamentals of a project and conduct some complicated mental math to arrive at a valuation. The reality is that it is very very hard to price these products and the fundamentals are highly debatable. Wayyyyy more than stocks. The price of a crypto token in the short run at least just follows momentum. If everyone is buying price goes up. Until they don’t.
With the wild upswings that the crypto market experiences, you are bound to come across many people who have made it big. Some of them will be lying just to get those extra followers. But many of them are not. They truly did catch the wave early and rode it to a massive peak. Rather than focusing on fundamentals you are better off learning how to trade based on momentum signals. This will help you understand when is a good time to get in and when is a good time to get out. I am no expert in this field but I did read a great book that I highly recommend. Check out The Crypto Trader by Glen Goodman.
4. The Role of FOMO in the Greater Context of Financial Markets
It’s not just the crypto market that’s prone to FOMO, of course. The stock market, real estate, and other traditional financial markets are all subject to the fear of missing out on a potentially lucrative investment. But in the crypto space, the rapid rise (and fall) of coins and the unique experience of trading digital assets can make the FOMO feeling even more intense. This is especially true in a bull market. When prices are rising and it can seem like there are endless opportunities for profit. But it’s important to remember that bull markets eventually give way to bear markets. The crypto market is no exception. In the face of market conditions like this, it’s crucial to remain disciplined and stick to your investment strategy, rather than making impulsive trades based on FOMO.
Other Crypto Acronyms
AMA, or “Ask Me Anything,” is a popular format for online discussions, particularly in the cryptocurrency and blockchain space. AMA sessions are online Q&A sessions where community members, crypto enthusiasts, and investors can ask the team behind a particular crypto project anything they want, in real-time. Read more.
In the simplest terms, ATH refers to the maximum price that a cryptocurrency has ever reached. For example, Ethereum’s highest price to date was $4,733. It’s important to note that ATH is specific to each individual. Continue reading,
Annual percentage rate (APR) and annual percentage yield (APY) are two important financial concepts that can have a significant impact on your financial decisions, particularly when it comes to investing in crypto assets. Find out more
Useful crypto terminology
When we say that someone is “bearish,” it means that they have a pessimistic view of the crypto market. They expect prices to go down, or for there to be a general downward trend in asset values. Find out more about how to spot a bear market.
A crypto address is a unique string of characters that represents a specific wallet on a blockchain network. It can be used to send and receive crypto assets, just like a bank account number or email address. Read on.
FAQs about FOMO
Is FOMO good for crypto?
It’s important to consider the role that FOMO plays in the crypto market. On the one hand, FOMO can be a major driving force for traders and investors, and can even contribute to the rapid rise in the price of certain coins or projects. However, it’s important to remember that FOMO can also lead to hasty, uninformed investment decisions, and can contribute to the overall volatility of the market.
How do you avoid FOMO in trading?
To avoid FOMO in trading, it’s important to set clear goals and a solid investment strategy, and to stick to it even when the market is volatile or there are seemingly lucrative opportunities. It’s also crucial to do your own research and due diligence before making any investment decisions, and to consult with financial advisors or institutions to get a wider perspective on the market. It can be helpful to set personal rules for yourself, such as only investing a certain percentage of your portfolio in high-risk assets or never making a trade based solely on hype or FOMO. By approaching the market with discipline and caution, you can avoid making hasty or uninformed trades based on FOMO and make more informed, disciplined investment decisions.
What are the dangers of FOMO?
The dangers of FOMO in trading and investing can include making hasty or uninformed decisions, chasing after hype or trendiness rather than conducting proper research and due diligence, and taking on greater risks of financial losses due to market volatility or false information. FOMO can also contribute to the overall volatility of the market, as people may make impulsive trades based on their fear of missing out, rather than considering the long-term potential of a particular asset. It’s important to be mindful of the potential risks of FOMO and to approach the market with caution and discipline, rather than letting the fear of missing out drive your investment decisions.