How to Keep FOMO from Wrecking Your Crypto
Don't fall prey to FOMO! Learn how to avoid this fear-driven frenzy and make smart trading decisions.
While panic selling is frequently mentioned as the main reason inexperienced investors lose money, panic buying can be equally dangerous. In this article, we’re going to talk about the popular crypto trading term "FOMO" and help you find ways to overcome it.
Once upon a time, you heard about a hot new cryptocurrency that was about to skyrocket. Seeing your friends get into it quickly, you also invested a significant portion of your savings into it to catch up with the rest of the herd. The next day, the value of the cryptocurrency plummeted, and you lost a considerable amount of money. Sounds familiar? It's because everyone, to varying degrees, has felt the overwhelming force of the fear of missing out (FOMO).
But fear not, because overcoming this dreaded feeling is not impossible. Here’s your brief guide on how to deal with FOMO.
What Does Fear of Missing Out in Crypto Mean?
Although the concept was first described by Dr. Dan Herman in the early 2000s, the term "FOMO" wasn't used until a couple of years later, in 2004, when Patrick McGinnis used it in an opinion piece for "The Harbus."
👉 The fear of missing out, or FOMO, is an uneasy feeling that others are living their best lives while you're sitting on the sidelines. It's a common problem on social media, where people's feeds tend to focus on the good things happening in their lives while downplaying the bad, making the viewer feel worse about themselves and their own lives.
But FOMO isn't just limited to social media. It can also rear its ugly head in the world of finance. When a hot coin is skyrocketing in value, it's easy to get swept up in the hype and feel like you're missing out on a big payday. But here's the thing: Making decisions based on FOMO is a recipe for disaster. You're more likely to make impulsive, emotional decisions that can lead to financial losses.
So, yes, the FOMO acronym in crypto describes a nagging feeling that everyone else is getting rich on the next hot cryptocurrency, except you.
Why Is Cryptocurrency FOMO Bad?
FOMO is bad because it clouds your judgment. Investing based on emotions alone is a surefire way to waste money. The hard truth is that most of those hot cryptocurrencies your friends are chasing will eventually fizzle out and crash back to earth. Remember that your slow, steady approach is the proven, rational path to building wealth over time.
Take heart in knowing that you only hear about the big winners, not the many more losers. For every investor who made a killing on bitcoin, there are dozens who lost their shirts chasing those fleeting returns. Stay focused on your long-term strategy and ignore the noise.
Crypto FOMO Example
Jimmy was all hyped up about this new cryptocurrency token that everyone was talking about. There was widespread coverage of it in the crypto news outlets, and social media was blowing up with investors raving about how it's going to go to the moon! The buying activity on exchanges was off the charts, and the price was shooting up every day like a rocket ship. Jimmy was keen to jump on board, but he was hoping to get in at a better price.
Unfortunately, the token's price just kept soaring higher and higher, and the more people talked about it, the more anxious he became. He was worried that he'd never get his hands on any tokens if he didn't act fast. So, he bought the tokens at an inflated price, hoping to make a quick buck before it was too late. But, as luck would have it, the market turned tables, and everyone started selling in a panic. Poor Jimmy lost a substantial amount of his capital due to his crypto FOMO.
If he had just chilled out and waited a bit, he could have scored a sweet deal and been in a much better financial position.
Moral of the story? Don't let FOMO get the best of you. Patience is key.
How to Stop FOMO Anxiety
The best way to avoid getting overtaken by FOMO is to step back and look at things objectively. Of course, it might be difficult to do so if your sensible, well-diversified portfolio plods along at 7% a year while your friend’s crazy gambles double every week. But don’t worry — it’s not for long. As the investor sage Warren Buffett once said, "The stock market is designed to transfer money from the impatient to the patient." Don't let FOMO turn you into one of the impatient ones. Just wait it out and check how your friend is doing in, say, a year.
In the meantime, if you’re still hesitant, look at the big picture by examining the coin’s longer price charts. Does the upward trend in the asset’s price seem to have no signs of slowing down? Is the asset really worth the price it’s currently trading at? If the noise from investors about the project has reached deafening levels, then it’s time to be cautious.
Having concrete, long-term objectives in mind might help keep you from making snap judgments. Instead of succumbing to FOMO and risking your capital because the price of your selected asset is moving away from your entry point, just wait for another opportune moment.
👉 Remember: There will always be opportunities in the future. This is particularly true when a cryptocurrency or token experiences a rapid and dramatic increase in value. Keeping your emotions in check will allow you to buy more assets at a lower price when the inevitable downturn comes.
How to Not Get FOMO: Tips on Preventing FOMO
Here are some tips to help overcome FOMO in cryptocurrency trading:
- Do your own research. Only invest in projects that you fully understand and believe in. Don't invest just because others are hyping them up. FOMO often leads to poor investment decisions. Bitgsap offers plenty of charting instruments that can help you analyze the market before entering positions.
- Set a price target and stick to it. Decide in advance the maximum price you're willing to pay for a crypto asset. Once it reaches that target, consider taking profits. This will prevent you from feeling like you missed out on further gains. Bitsgap has a number of tools that can help you trade more efficiently and hedge your portfolio against unfavorable exposure — smart orders with (Trailing) Take Profit, Stop Loss, and OCO, scaled, limit and stop orders, bot performance overview, and backtesting.
- Don't keep checking prices. Constantly watching the rapid price swings of crypto can fuel anxiety and FOMO. Set crypto bots instead and go do other things. Checking too often leads to poor trading decisions. Bitsgap offers one of the best-automated trading tools on the market — DCA, GRID, BTD, and COMBO — so use them to your advantage.
- Have a balanced portfolio. Don't put all your money into any single crypto. Holding a diverse range of coins helps ensure you benefit from gains in multiple areas of the market. And if one drops significantly, it won't wipe out your entire investment. Bitsgap offers portfolio management tools that can help you watch over your portfolio and take necessary actions should the unforeseen happen.
- Consider the risks. Every crypto comes with substantial risks like price volatility, hacks, scams, and loss of value. Make sure any FOMO is balanced with an assessment of the potential risks and downsides. Not all high-flying cryptos will sustain their gains.
- Talk to others to gain perspective. Speaking to other experienced crypto investors can help provide balance to your own FOMO and enthusiasm. Discussing with others exposes you to different perspectives and helps you make stronger decisions. Bitsgap has a large community of some 500K+ traders along with a plethora of social media channels and chats where you can discuss the latest market news and ask advice from traders like you.
👉 Remember, you can't time the market perfectly. FOMO is often driven by the belief that you could have maximized your gains if only you had bought/sold at exactly the right moments. The truth is, very few people are able to time the crypto market with such precision. Do your best, and don't beat yourself up over imperfect decisions.
Ready to overcome FOMO with smart tools from Bitsgap? You’re welcome to sign up for a seven-day free trial today!
Bottom Line: Fear Not!
Instead of jumping into the latest investment trend without doing due diligence, take a deep breath and relax. We all feel FOMO from time to time. But when it comes to investing, it's best to keep a clear head and stick to a solid strategy, rather than chase after the latest shiny coin.
What Is FOMO Abbreviation?
FOMO in investing refers to the fear of missing out on potential profits by not investing in a particular asset or market at the right time. It can cause investors to make impulsive or emotional decisions, which can ultimately lead to financial losses.
How to Create FOMO?
Making a bold prediction about a project’s future, creating fake investment tips, or luring an influencer to promote a worthless token are among the few ways to generate unsustainable hype in crypto. While we cannot suggest unethical ways to create FOMO, these are a few examples from the past that taught unwitting investors some very hard lessons:
- During the late 1990s, investors were caught up in the dot-com bubble, where, out of FOMO, they kept pouring money into dubious ventures with little-to-no earnings.
- In the mid-2000s, easy credit and low-interest rates led to a housing bubble in the United States. This fear of missing out on the opportunity to own a home led to many people taking out risky mortgages they couldn't afford, which contributed to the 2008 financial crisis.
- Finally, in late 2017, the price of bitcoin skyrocketed, causing many people to worry about missing the opportunity to get rich quickly. Some investors took out loans to buy bitcoin, only to see the price crash shortly after.
How to Help Someone with FOMO?
So, you've got a friend who's going through a major case of cryptocurrency FOMO. First, you don't want to come at your friend with all guns blazing, insisting that they're making a huge mistake. That's a surefire way to hurt their pride and have them tune out your advice faster than you can say "blockchain." Instead, try presenting them with some hard facts about the current state of the market. If they're really dead set on making a move, however, try suggesting they don't put their entire portfolio on the line.
Of course, at the end of the day, your friend needs to be able to recognize FOMO for themselves. But that doesn't mean you can't be there to offer some friendly guidance. Just remember to approach the conversation with an open mind and a willingness to help and listen.