Guide

Crypto Explainer: What is FOMO?

FOMO in the context of Crypto is short for “Fear Of Missing Out”. FOMO is the feeling of anxiety or the idea that other people are sharing a positive or unique experience. While on the other hand, you are missing out.

FOMO refers to the feeling of fear and anxiety that you might be missing out on a potentially lucrative investment or trading opportunity. Good examples are a sale when a price suddenly rises or a bulk purchase of securities when a price is low.

Crypto investors may feel this when they see a bull rally in a coin or token. However, they have yet to buy it. The FOMO feeling is particularly prevalent when a cryptocurrency rises in value significantly over a relatively short period of time. This sentiment will likely trigger a surge in its price. 

Quite often, it’s all about euphoria or fantasies when a new cryptocurrency enters the market. But also, there is a place for FOMO during strong price fluctuations and ups and downs, which supposedly represent good investment opportunities.

What are the Pros & Cons? The Consequences of FOMO

Let’s take as an example Bitcoin (BTC), the world’s first and biggest cryptocurrency. Experts say that Bitcoin has a limited supply of 21 million BTC. However, as of 2021, around 18 million BTC have already been mined, and the rest are planned to be mined until 2140. People that invest in cryptocurrencies have access to this information, and they are more inclined to buy Bitcoins because of the FOMO from its scarcity. So the consequences of FOMO can be crucial.

Pros

FOMO can offer some good opportunities that may be of a trader’s interest. The main advantages are:

  • Favorable buying and selling opportunities;
  • FOMO can encourage investment in new coins;
  • It can be a good guideline for traders.

Cons

Speculated FOMO also has serious disadvantages. The key disadvantages are:

  • FOMO can lead to a total loss;
  • It can lead to unreasonable trading.

Side effects of FOMO

If there is a fear of missing out, the consequences are often quite serious. FOMO leads to irrational thinking and can lead to unreasonable decisions in crypto trading. In detail, this means that people buy or sell rashly, although this was actually unreasonable. 

FOMO can therefore have negative effects and is best avoided. Another side effect of it is that the great fear and trade it triggers can strongly impact cryptocurrency prices, especially when it occurs in large quantities with numerous traders at the same time.

How to overcome FOMO?

The feeling may drive individual investors, or the market participants as a whole, to make investment decisions based upon emotion rather than logic and reasoning. This can result in a big bubble in the asset, incurring greater risks of financial losses. 

Getting rid of it isn’t easy. To deal with it, do your own research in the cryptocurrencies before making investment decisions, create a set of rules for trading, or set limits on the allowable losses and profits.

The digital currency world is prone to manipulations. One way it happens is by artificially pumping the price and dumping or selling the cryptocurrency. When the prices fall, those who fear missing out on the rise end up making losses.

Also, check out:

Leave a Comment

Your email address will not be published. Required fields are marked *

Close Bitnami banner
Bitnami