The FOMO Syndrome in the Cryptocurrency Market: What Is It, and How Do You Deal With It?

Fear of missing out (FOMO) is a psychological phenomenon that describes the fear of losing a profit opportunity or a chance for success due to incorrect decisions or actions.

Where Did the Term “FOMO” Come From?

Research has shown that FOMO is more common among people aged 18 to 35. FOMO is especially common among those who filter their lives through social media, causing a sense of missed opportunities or failures. This term became especially popular during the active development of Facebook, Twitter, Instagram, etc. It was then that people began to feel the pressure to stay informed and started to worry about missing anything significant or fascinating.

FOMO in the World of Trading and Cryptocurrencies

In trading, the concept of FOMO refers to the fear of missing out on a potentially profitable investment opportunity. Those who feel they are going to lose out on a growing asset tend to act rashly. For example, one might buy a cryptocurrency when its price is rapidly increasing, only to witness its crash shortly after. Or one might sell an asset too early due to the fear of losing money.

An Example of Crypto FOMO

In 2021, tweets from Tesla CEO Elon Musk about Dogecoin (DOGE), known for its position as the leading meme coin in the cryptocurrency market, caused FOMO among those who did not own DOGE at the time.

The inherent volatility of Dogecoin means that market sentiments and social media posts significantly influence its price movements. Many believe that DOGE is successful solely due to Musk’s increased interest. Analysts found that 36% of American investors based their investment decisions on the businessman’s tweets. After each mention of DOGE on Musk’s Twitter, the coin’s price jumped.

The meme cryptocurrency has experienced numerous price fluctuations depending on how Musk’s words were perceived by the market. The effect caused by FOMO in the crypto community intensified investments in Dogecoin.

Crypto FOMO is mainly driven by the desire to capture the next profitable successor to Bitcoin when it becomes possible. However, in reality, before investing in any token, it is the combination of rational decision-making after conducting in-depth research that leads to a potentially profitable step.

Dangers of FOMO

FOMO is a powerful emotion that can lead not only to reckless investment decisions in cryptocurrency but also to severe stress, addiction, sleep disturbances, and serious mental health issues. There have been cases where people fell into deep depression and attempted to solve their emotional problems with alcohol.

Recognizing and addressing the first signs of FOMO is crucial for making informed investment decisions and protecting your savings. To do this, you need to be able to recognize FOMO, understand the consequences of this syndrome, and take steps in advance to prevent the development of this emotion.

Causes of Cryptocurrency FOMO

1. Rapid price growth when the price of a cryptocurrency rises sharply and quickly.
2. Social media posts, blog articles, and news praising a particular cryptocurrency can create the feeling that everyone else is making money from it.
3. Fear of being left out. Investors begin to fear missing the opportunity to profit if they do not invest immediately.
4. Unrealistic expectations that price growth will continue indefinitely.
5. Making investment decisions based on emotions rather than logical analysis and risk management.

Consequences of FOMO

1. FOMO can lead to unwise investing in dubious or overvalued cryptocurrencies.
2. When prices fall, investors driven by FOMO are more likely to incur financial losses.
3. Trying to keep up with market dynamics can cause significant stress and anxiety.
4. FOMO can lead to the formation of unhealthy investment habits, such as chasing trends and making emotional trades.

How to Prevent FOMO From Developing

Cryptocurrencies are a high-risk market where asset prices can change within minutes or even seconds. This can cause investors to feel the pressure of FOMO, especially when they see a coin’s price skyrocketing and they do not have time to invest in it.

1. Don’t make decisions based on emotions. Investing in assets out of fear of missing out on an opportunity to make money can lead to impulsive actions and financial loss. A biased decision can be the worst of all options.
2. Study the market carefully. To make informed investment decisions, it is necessary to understand the technology behind cryptocurrencies.
3. Determine your investment strategy. Before investing in any cryptocurrency, develop an action plan and stick to it.
4. Invest only what you can afford to lose. Cryptocurrencies are high-risk assets, so do not invest all your savings in them. Invest only what will not affect your financial stability in the event of a loss.
5. Use dollar cost averaging strategies. Buy cryptocurrency regularly, regardless of price fluctuations. This helps to smooth out potential losses.
6. Communicate with other investors. This will help you get information, share experiences, and get advice from more experienced market participants.
7. Ignore the noise and develop patience. Avoid emotionally charged news and social media posts. Focus on objective market analysis. Yes, the market is volatile. Therefore, do not expect to get rich quickly. Be patient and stick to a long-term strategy.

Dealing with crypto FOMO is an important aspect of preserving not only your finances but also your mental health.

6 Key Questions Everyone Should Ask Themselves to Get Rid of FOMO

1. Why do I feel the need to invest right now?
2. Is my investment strategy logical, or is it just a desire to follow the trend?
3. What level of risk am I willing to accept when investing in cryptocurrency?
4. Do I have enough knowledge about the cryptocurrency I plan to invest in?
5. How much time and energy am I willing to dedicate to market analysis and managing my investments?
6. Will I be able to stay calm and make rational decisions in case of market volatility?

By answering these questions, you can better understand your motives and decisions when investing in cryptocurrency and avoid the FOMO syndrome.

Recognizing and addressing the first signs of crypto FOMO is crucial for making informed investment decisions and protecting your savings. By setting investment goals and managing risks, you can control your emotions and invest in cryptocurrency wisely. Remember that this process involves risks, and it is always important to invest only what you can afford to lose.