FOMO or Fear of Missing Out is a common and at the same time destructive feeling in financial markets, and specifically in the cryptocurrency market. The volatile price of these assets along with the novelty of this market leads to a high degree of FOMO. However, there are some solutions that if you follow, you can control this feeling and minimize its effects. Had you heard the term FOMO before? Can you think of any other solutions to avoid it? Share your opinions with us.
What is FOMO?
FOMO stands for “Fear of Missing Out”. When you suffer from FOMO, you think that everyone is making big profits and you are the only person who is missing out on the opportunity. This is while this opportunity is only imaginary and does NOT exist in reality. FOMO usually leads to wrong decisions and big losses. This seems logical because, in a financial market, you should make decisions based on sound reasoning and strong facts. An emotional decision has no other result than failure. Of course, you may buy something or trade an asset based on FOMO and make profits, but we have to warn you that this is only out of chance. If you continue this trend, you’ll undoubtedly experience irrecoverable losses.
It’s worth mentioning that FOMO is not limited to financial markets. The growth of social media networks has spread FOMO in different aspects. When you compare your lifestyle, your face, your body, your job, your social status, your financial status, or any other thing with another person on Instagram, you are actually suffering from a type of FOMO. As you may have guessed, FOMO can have different shapes. But in this article, our focus is on FOMO in financial markets, especially the cryptocurrency market.
FOMO and the cryptocurrency market
FOMO is a very common feeling in the cryptocurrency markets due to 2 reasons:
- The price of cryptocurrencies is very volatile in comparison to the other assets;
- The cryptocurrency market is a relatively new market and seems like a good opportunity for making big profits.
You may have heard about people who have got rich overnight using crypto, or users who have held their bitcoins for a long time and have become millionaires now. These stories may tempt you to take big risks or go through illogical trading behaviors, only because you want to have the same experience. We have to tell you that these stories are NOT wrong. In the world of cryptocurrencies, everything is possible. We really have seen coins or tokens whose prices have increased by 10x overnight. But don’t forget that this is a double-edged sword. As we mentioned earlier, in the world of cryptocurrencies, everything is possible. You may invest your hard-earned money in a new unknown cryptocurrency and lose everything in a few hours or even a few minutes.
FOMO in this market can also happen as a result of a rumor that a price of a certain coin is going to increase. These types of rumors make users rush to buy that coin and wait for large profits. But PAY ATTENTION: the price of cryptocurrencies is directly determined through supply and demand. When the demand for a specific asset increases, its value also increases, and vice versa. This unreasonably high demand leads to a price bubble, and when the price reaches its highest possible amount, it’s exactly when the whales come in. They sell their cryptocurrencies at the highest possible price, and since a large volume of that cryptocurrency enters the markets, it increases the supply and lowers the price. That is how you as a retail investor lose, and help a whale gain more profits.
Maybe the best solution in this confusing situation is to increase your knowledge to the most possible extent and to set rational expectations. When Bitcoin was created, only a few people could predict its today price. Don’t forget that this opportunity is not going to happen every day, but also remember that if you have logical expectations, you can make acceptable profits. Just study a lot, check the new projects more often, try to improve your fundamental analysis skills, and avoid dreamy expectations.
How can we avoid FOMO?
In the previous part, we referred to some solutions for avoiding FOMO. Some other solutions you can use to avoid FOMO and make logical decisions include:
- Have a well-tested trading strategy and follow it.
- If your trading strategy proves impractical, change it.
- Follow the news from reliable sources.
- Avoid the stress of social media networks.
- Don’t blame yourself for the lost opportunities.
- Don’t covet.
- Increase your knowledge.
- Improve your technical and fundamental analysis skills.
As the final point, we would like to say that having a strategy is the enemy of FOMO. Experiencing losses is unavoidable in the cryptocurrency market, but using a well-tested strategy, you can minimize wrong decisions and losses. We also suggest that you avoid rumors to the most possible extent. As we mentioned, FOMO in the cryptocurrency market is more common than in other financial markets, but if you increase your knowledge, you will definitely be more successful.