FOMO is one of many phenomena that investors and traders of all types face on a daily basis, whether in bitcoins and other cryptocurrencies or in more traditional investments. However, with the emergence of cryptocurrency and the large influx of new investors in recent years, this phrase has taken on its full meaning. An overview of a condition that is both well-known and poorly handled.
What Is Fomo in Crypto? Definition
FOMO is an abbreviation for “Fear of Missing Out,” which refers to the anxiety caused by the prospect of missing out on an opportunity or a chance of getting something valuable. This long-identified phenomenon owes its full growth to the emergence of the Internet and social networks. Nowadays we can access any information and data, allowing us to know everything at any time. This obviously has consequences: our brain struggles to keep up with all of the demands it confronts. Our judgment is weakened, and our patience is continuously put to the test.
While FOMO affects many parts of our lives today, it gets especially complicated when it comes to investing and trading cryptocurrency. Who hasn’t, for example, kept an eye on the price of an altcoin, waited before investing, then noted a 10% increase and lamented the missed opportunity?
This strong relationship between FOMO and the bitcoin market is attributable to a variety of factors:
In recent years, the value of cryptocurrencies has skyrocketed.
The ecosystem is expanding, and new patterns emerge on a regular basis.
On the Internet, success tales and other record gains are prevalent.
Many novice investors become acquainted with cryptocurrency trading.
Social networks and influencers are the initial entry points into the market.
As a result of being overburdened with ever-increasing information and demands, bitcoin aficionados are experiencing a continuously growing fear losing out on a great chance, an investment, or a potentially lucrative deal.
A phenomenon that can conceal a variety of risks.
What is the main risk of FOMO?
Now we realize that FOMO harms our mental health. One of the main dangers in investing and trading is falling victim to FOMO.
To succumb to FOMO is to put yourself at risk by basing your investments on your emotions and temptations. It is to surrender all thought and strategy in favor of primal emotions, which are frequently illogical and deceitful. It’s behaving by repeating statements in your head: “I could have earned more,” “I knew it was going to continue to climb,” and “this time I feel fantastic.”
These emotions, however, are the investor’s and trader’s deadliest foes. They make it hard for you to take the bare minimum of safeguards to assure a good projected return on your investment.
There are several examples of this sort of action and its consequences:
While you have defined an entry zone for a cryptocurrency, its price continues to rise. After a 50% increase, you end up investing out of fear of losing out on a once-in-a-lifetime chance. Unfortunately, the value of this cryptocurrency falls, and you must sell it at a loss.
Following a string of disastrous trades, you put the remainings of your cash into a business advocated by your favorite influencer without making your own research. Regrettably, it was a hoax, and you lost everything.
You decide to invest in the project of the moment after hearing about tremendous profits on the latest trend, Play to Earn. Unfortunately, the latter was highly overpriced, and you have suffered huge losses.
As you may have guessed, bitcoin fans frequently fall to FOMO as a result of an influence of a mass. Aside from the reality that the masses… usually lose, it is crowd psychology that creates illogical market movements, which are frequently the source of speculative bubbles.
This is easily explained: we observe how others behave in order to determine the proper conduct to adopt in a particular scenario. Some “influencers” have recognized this and are using these ideas to create FOMO in their networks.
As a result, we are typically persuaded to succumb to FOMO during the latter part of a bullish rise, that is, when:
The increase has become illogical.
The enthusiasm is at an all-time high.
Profits are taken by foresighted investors.
The risk-to-return-on-investment ratio is the lowest.
Of course, money may be made after succumbing to FOMO. Failure to modify your trading habits, on the other hand, is like wagering on a potential short-term gain against likely long-term losses.
How to Deal With Fomo?
Learning to overcome FOMO is typically painless and the best results are coming with the experience. Ten common sense concepts can help you slide through the cracks:
1 – Have a plan!
This is arguably the most general principle: do not attempt to cross the finish line without first passing through the square one. When it comes to investing and trading, your plan is that starting point.
Choose a plan that works for you, one that you can tweak and stick to. Don’t give in to your basic instincts; instead, set and stick to boundaries on permissible losses and earnings. Ask yourself:
>> Why do I buy the token? >> At which price do I wanna sell? >> Who should buy the token from me?
2 – Have a portfolio risk management strategy
Create a well-balanced portfolio, allocate a small portion of your portfolio to riskier ventures, and keep the leverage to a minimum.
Remember to collect gains and not be greedier than your action plan allows.
3 – Do Your Own Research
Learn about the project before investing, and learn the complexities of the market before it tries to push you into the investment.
Don’t believe everything you read (even this article): everyone who inspires you has been wrong before, will be wrong again, and maybe are wrong at this exact moment. It generally helps to analyze 3-5 different sources and/or sides of the project before you APE into anything. (Team, Business case, Token use, Community, Tokenomics)
DCA is an investment technique in which a predetermined amount is invested in a cryptocurrency at regular periods. Consider using this method to smooth your entrance price and lower the impact of volatility on your entire investment.
5 – Be Patient – There are a lot of opportunities
Do not rush your research, and always allow yourself time to reflect before acting. Give enough time to the market to help you attain the goals you’ve set for yourself. Your order was not fulfilled? Regardless, there will always be other options that meet all of your requirements.
6 – Take a Step Back
Take the essential perspective on your assets, price movements, and portfolio ups and downs. One of the biggest reasons for making hasty decisions, such as succumbing to FOMO, is a lack of hindsight. Make sure you really understand what you are investing into.
7 – Face Your Certainties
Deconstruct the mental models that social media feeds that distort your perception of reality. No matter how successful it looks like, not everyone benefits from cryptocurrency investment. Many people fail, make errors, and endure losses without ever talking about it.
8 – Learn to Accept and move on – failures are part of the process
Accept your shortcomings, your lack of time to devote to your studies, your missed opportunities… You are not, and will never be, a master of all maneuvers.
9 – Don’t Be Isolated
Surround yourself with individuals who share your feelings, challenge your beliefs, and share your struggles in order to conquer them together.
However, be cautious not to violate the other rules in order to avoid a potentially negative group impact.
10 – Follow the Trend Intelligently
It may appear strange, but if you followed the prior recommendations, the moments of collective FOMO represent a period synonymous with opportunity for the knowledgeable investor. Learn to appreciate it while being disciplined.
Surrendering to FOMO can cause you to make the worst judgments. Fortunately, adhering to a few guidelines can help you approach the market with greater calm. Meanwhile, consider stablecoins and their numerous advantages.
Most investors fails to see investing as a long-term endeavor. Wealth is often built gradually through time, rather than instantly. Resist the urge to panic in the face of terrible news or to follow the current trend. Focus on your strategy with patience and avoid making decisions out of fear of losing out.
12 – Overcome your behavioral biases
There are behavioral biases that can impact our reaction to FOMO whether we are aware of them or not. Here are a some of the most common:
Confirmation bias — We have a tendency to seek information that confirms our ideas and validates our point of view. Solution: Look for facts that challenge your beliefs about a certain investment.
Overconfidence – According to research, many people are overconfident in their investment abilities. We can all agree that most people cannot “beat the market” by trading regularly. But we have the impression that we are the exception. Solution: Do a reality check on yourself. Even skilled investment advisers may struggle to outperform the market.
13 – Beware of “sure things” or “hot tips”
Investment websites, industry gurus, television shows, coworkers, and even family members may all promote the newest recommendation for the next great thing. Don’t give in to FOMO and invest without understanding how it works or the hazards. Conduct your own research and take the time necessary to understand whether the investment is worthwhile and aligns with your financial objectives.
Summary on how to avoid FOMO in trading
>> Have a plan! >> Have a portfolio risk management strategy >> Do Your Own Research >> Rely on Dollar cost averaging (DCA) >> Be Patient – There are a lot of opportunities >> Take a Step Back >> Face Your Certainties >> Learn to Accept and move on – failures are part of the process >> Don’t Be Isolated >> Follow the Trend Intelligently
What is the impact of FOMO on mental health?
FOMO, according to studies, causes great discontent and has a negative impact on our physical and mental health, causing mood swings, loneliness, feelings of inferiority, low self-esteem, excessive social anxiety, and heightened levels of negativity and melancholy. It is no wonder that the usage of antidepressants has increased dramatically in recent years as a result of FOMO.
How do we overcome FOMO?
Reducing reliance on social media would undoubtedly help. We might also try to comprehend the lives of others who are less fortunate than us. Giving time to a philanthropic or social initiative that benefits others less fortunate might help us realize how lucky we are.