The term FOMO (fear of missing out) in crypto has been very popular over the last few years. Indeed, as soon as the market starts moving higher, people start talking about FOMO and how it could affect rational investment decisions.
In this guide, we share with you all the details about FOMO in crypto. It is not easy to control our emotions in the market, this is why understanding what FOMO means becomes very helpful for many investors.
Disclaimer: the information shared by AltSignals and its writers should not be considered financial advice. This is for educational purposes only. We are not responsible for any investment decision you make after reading this post. Never invest more than what you are able to lose. Always contact your professional. financial advisor.
What is FOMO?
Let’s start with the basics about FOMO, or Fear of Missing Out. In cryptocurrencies, this term describes a situation where the whole community or market share positive experiences, comments and information about a cryptocurrency (token) and you do not have exposure to it.
Basically, is believing that you could miss a large investment opportunity due to a lack of money or willingness to invest in a specific project. These potential investments are literally potential. There is nothing explicit about earning or making money with these investments.
The FOMO feeling appears when a token starts moving higher on a daily basis and the investor wants to enter. The problem is that they might not be liquid enough to enter the position. As they see the market moving higher they might request a loan or borrow money in order to enter already when several indicators show the market is in an overbought condition.
This is certainly dangerous in terms of profitability for the person that is experiencing a FOMO situation. He fears he would miss the bull tend and that he would not be able to experience the same gains that others experience. Most of this fear comes from people sharing their positive experiences in the market and how they have been making large profits.
How to Avoid FOMO?
As you have seen, FOMO is a dangerous thing. It could definitely negatively affect our position in the market. For example, if you were waiting until the last moment to purchase the asset that was growing in price, then you could enter at a moment in which the market would start reversing.
Let’s take Bitcoin. If you have been watching BTC moving higher over the last months but you were not able to enter the market due to different reasons, you just decided to take a loan and purchase Bitcoin at around $60,000. You believed that the coin was headed to $75,000 or even higher. As the price of BTC moves higher and surpasses $61,000 you get happier but you definitely want more. You decide to borrow more funds and enter another position, but this time with leverage at 50x, as you see the bull market is not over. Now you are part of the bull market and you enjoy the large gains everyone was talking about.
However, the market suddenly moves downwards. It falls 10%, 20% and then 30%. You believe it would recover and you decide to borrow more funds to keep your leveraged long position open. You see how you are running out of funds as BTC is now 40% down. Eventually, when the price dropped by more than 50%, your position gets liquidated and you lost your funds.
This is just an example of the risks that you could face when you FOMO in the cryptocurrency market. This is also something that can happen with other coins and not only with Bitcoin. This is why you definitely want to avoid this problem.
What does FUD Mean?
FUD is another term used in the cryptocurrency market that works in a contrary way to FOMO. This is a situation in which the price of an asset moves down pushed by negative sentiment in social media and other mainstream media outlets. For example, the recent talks and discussion about Bitcoin’s energy consumption could be related to how an effective FUD operation looks like.
FUD stands for Fear, Uncertainty and Doubt. This term became popular during the last years when Bitcoin and other virtual currencies became very useful for investors to make profits. In the future, we might experience other types of FUD operations that could affect your positions.
