Crypto is a rough terrain to navigate, even for the most experienced of investors. There are many things that can get in the way of achieving success in this space, from market volatility and changing regulations to unrealistic expectations, the lack of a clear investment strategy or poor understanding of complex market dynamics.
However, in many cases, the biggest enemy in trading is your own emotions. The famous fear of missing out, or FOMO in short, is a widespread issue in crypto investing – one that has made numerous victims over the course of time and continues to pose a serious challenge to investors.
It’s perfectly normal to feel a bit anxious and nervous when investing because the stakes are often high, and there are many variables that you can’t control and that can influence investment outcomes. Therefore, you need to keep your eyes and ears open and stay in the know with everything going on in the industry. This will help you spot opportunities in due time and make informed investment decisions. But if looking at crypto prices makes your heart race, and every time you hear a rumor, you feel an uncontrollable urge to react, causing you to make sudden trading decisions without thinking things through, then you might be dealing with a classic case of FOMO.
Checking the news and crypto sites obsessively because you can’t escape the idea that you might miss out on a major opportunity if you don’t stay connected to the market 24/7 is certainly not normal behavior. But things aren’t always like this. Most investors go down the FOMO path almost imperceptibly, so sometimes it can be hard to tell when you’ve left the land of reasonable cautiousness and stepped into FOMO territory.
That’s why it’s vital to spot the signs early on and act before FOMO gets the best of you.
What is FOMO?
You need to know your enemy if you want to outsmart and defeat it. So, familiarizing yourself with FOMO is the first step towards combating it. Although FOMO as a concept is relatively new, being introduced in the late 20th century, the phenomenon has been around since as long as humans have existed. It might not have had a name, but it’s always had a presence.
FOMO describes the intense concern people feel when they feel like they’re not in the know and are missing out on something important that could change their lives for the better. It ties to the idea that one has to do everything in their power to avoid regret. This fear prompts people to act irrationally and make very poor choices.
Therefore, FOMO is not exclusive to crypto investing. It can happen in all kinds of circumstances that have nothing to do with finance. Some people experience FOMO related to social events, work situations, or even entertainment.
FOMO in crypto investing
The crypto realm is an area where FOMO is most noticeable due to the novelty and the hectic nature of the cryptocurrency market. All the uncertainty, contradictory predictions, and stories circulating in this space can fuel investors’ anxiety and make them succumb to their emotions instead of listening to reason.
As a result, many traders and investors choose to buy or sell assets based on unverified information, only to realize later they’ve made a huge mistake. The risk of FOMO in crypto is accentuated by the fast pace of change and the belief that one has to get in early on, before the next appreciation wave or the next big crypto explodes, if they want to enjoy substantial gains. Investors have become so obsessed with spotting hot cryptos before everyone else that they are sometimes oblivious to the risks.
It’s necessary to mention that crypto FOMO doesn’t always come from a fear of missing out on profits. It can also be prompted by the desire to avoid losses, as was the case when TerraUSD (UST) and Luna crashed in 2022. The influx of crypto news and information coming from all sides can also be truly overwhelming and trigger feelings of unease and fear among investors.
When someone makes a bad investment because of FOMO, the consequences can go beyond the loss of capital and extend to other areas of life. Many people deal with mental and physical health issues or experience social decline as a result.
Fighting FOMO
With FOMO being such a prevalent phenomenon, you need to know how to keep it at bay. The following strategies can help you keep your emotions in check and manage your investments wisely.
Recognize the signs
FOMO can sneak in on you subtly, so being aware of the signs can help you spot and stop it in its tracks. Take a step back and analyze your behavior. If you notice that you’ve been thinking about crypto incessantly or catch yourself trying to copy other investors’ moves because they had a recent success, you might be at risk of developing FOMO.
Pause and research
FOMO is fueled by a combination of rumors and news coming from different sources. This can make you believe that something life-changing is going on and you have to act immediately. The easy way to debunk falsehoods is to conduct independent research and check to see if the stories you’ve heard have any solid basis. Getting your information from trustworthy sources can help you get to the bottom of the truth and separate facts from fiction.
Maintain a realistic perspective
Everyone is chasing profits, but you have to understand that it’s impossible to win all the time. As with all other forms of investing, crypto trades can lead to both losses and gains. Keep in mind that the market is cyclical, with bullish and bearish trends coming and going regularly, so you need to come to terms with the fact that downturns are inevitable. Knowing that will make you less susceptible to emotional trading.
Develop a strategy and stick to it
One of the most important things when trading crypto, or any other asset for that matter, is to create a strategy based on your personal needs and goals. So, no matter what the market throws at you, you’ll have a plan that you can follow and will help you stay on track.
If you want to minimize risks in crypto investments and protect your portfolio, knowing how to deal with FOMO is a must.
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