How to Avoid Crypto FOMO (Fear of Missing Out)
FOMO, or Fear of Missing Out, is a term used when traders or investors feels compelled to take an action due to a market event.
The Fear of Missing Out, or FOMO for short, is a very familiar feeling among traders and investors alike. With so many cryptocurrencies booming left and right, seeing the large green numbers have always made people feel the itch to buy or swap for a particular crypto that everyone is talking about.
There is nothing wrong with buying or swapping, of course — just be sure to do it at the right time. Unfortunately, many people are terrible at timing it out, simply for two reasons. One is that they let their emotions get the best of them. The other is the fact that it’s impossible to predict the future.
The best ways to avoid FOMO are to know your emotional tendencies, learn to analyse a crypto asset’s fundamental value, and learn to commit.
How to avoid crypto FOMO
Know your emotional tendencies
There are many cryptocurrency enthusiasts in the social media space. Some have innocent intentions of educating the masses, while others simply try to promote their invested coins to generate higher demand (and price).
However, this is just the consequence of the free market. Your real enemy isn’t the crypto community, but your own emotions and temperament. If you are easily swayed by the opinions of social media crypto traders and influencers, then you need to learn to stop before you buy.
Sometimes, it’s not the case of being affected by the social media community that got you into buying. Maybe on a live price chart, you saw a meteoric rise in a cryptocurrency, rising in double-digit increments every day! You decided to buy it because you didn’t want to miss out.
(I’m guilty of this one.)
So, know yourself and how you react to crypto news. As a writer in the crypto space, my job is to read the latest trends in the crypto industry, so my occupational hazard would be to expose myself to FOMO-inducing content!
Learn to do fundamental analysis of cryptocurrencies
Trading is fun, and learning some technical analysis for quick gains is exhilarating (trust me, I’ve been there). However, I understand that this is not sustainable for me since I’m not a professional trader.
If you are not a professional trader either, then you should learn to evaluate cryptocurrencies beyond their price, and find its value. Unfortunately, that’s not as straightforward as evaluating, say, a company’s stock. There is no price-to-book value ratio to look up for any crypto.
More bad news — while there is a set of methods to determine the ‘fundamental’ valuations of a cryptocurrency, such as determining the network value to transaction (NVT) ratio, it’s a little too technical to understand, and such methods haven’t been proven over a long enough period of time.
The good news is that you only need to answer this basic question to be able to find a promising crypto investment that is likely to have good fundamentals: “Will businesses actually adopt it?”
Notice that I specifically use the word ‘businesses’ rather than ‘people’. People (and large institutional investors) can buy and hold a crypto asset, making it more scarce and therefore valuable.
However, the value shouldn’t be solely derived from scarcity, but also utility. Ether, being the first cryptocurrency to power a blockchain that enables decentralised applications, has utility. But at the time of writing, it has very little in terms of corporate adoption, since it has a problem with scalability, network congestion, and high transaction fees.
Check the latest crypto rates: View the latest prices with our crypto tracker.
Learn to commit (after you’ve done your research)
Trading cryptocurrencies is like speed dating, but investing in them is like marriage. With trading, you may or may not care about the crypto’s underlying value, use cases, and future implications. You may not need to know about crypto as deeply as an investor would.
Investing, on the other hand, is not always emotionally satisfying. There will be times when you feel like you’re right, and there will be times when you feel like you’ve been wrong the whole time. Investing requires strong commitment, and the ability to hold on to your asset regardless of the market price at any point in time.
Having done lots of research on a cryptocurrency that you want to hold for a long time, you will gain confidence and trust in the asset. Trust and confidence are powerful feelings that emerge after looking at a sufficient amount of evidence and having gone through a process of sound reasoning.
On the other hand, FOMO is a feeling that is fleeting, based on fear, envy, and biased speculation. FOMO comes from insecurity, but with enough research, it’s possible to defeat it.
What is FOMO?
FOMO, or Fear of Missing Out, is an acronym that is used to define the line of thought of not wanting to miss out on a particular event – and in this context, the FOMO of not buying or investing in cryptocurrencies due to market hype, news, or related events.
Whether intentional or not, crypto social media communities, from social media groups to content creators, are in part responsible for creating FOMO by making unrealistic projections of the future value of crypto assets.
Just go to YouTube and type in “best crypto to invest 2021” and look at how content creators frame their videos’ thumbnails. It’s not so uncommon for them to use words or terms like 10X, 100X, +1000%, BUY THESE, etc. (and yes, all in capital letters to get your attention).
Unfortunately, crypto investors who watch these videos aren’t normally the astute investors who professionally take on financial risks.
Most, if not all, of the viewers, are most likely rookie retail investors who are looking for quick gains, and who may not care that much about the future use cases and implications of the technology being offered. This is the reason why I urge you to learn about the coin’s fundamentals before deciding on buying it.
FOMO and investment success rate in the crypto market
FOMO is not unique in the crypto space. It happens in pretty much all liquid markets, like stocks, bonds, forex, futures, commodities, etc. FOMO in the financial markets isn’t just a feeling of envy; this fear of missing out can have a negative impact on financial investment success.
Warren Buffet, a long-term stock investor, famously said, “The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.”
“Following the crowd” isn’t necessarily the best investment strategy. When you buy a cryptocurrency because everyone’s talking about it, you actually have more risk of a drawdown (when prices go down temporarily).
This is because there is a chance that you’re already in too late when the crypto has become too overvalued and primed to be sold by the more savvy traders.
With that said, what are your thoughts on FOMO (Fear of Missing Out)? It’s a common trend with many things even outside of the crypto space.
As social creatures, we have a tendency to want to be involved in the latest things in society. However, when it comes to crypto, it’s best to exercise caution before investing.
Want to start investing in crypto? Read our guide on dollar-cost averaging.
With that said, we hope this article has been insightful for anyone interested in investing in cryptocurrencies. Subscribe to our newsletter below for more articles like this!