Aside from having good strategies and understanding of the crypto market, becoming a great cryptocurrency trader requires you to get familiar with commonly used terminology.
There are a number of terms/expressions in crypto that are quite specific and do not exist in other areas of life or other types of trading. Understanding those terms is important, mostly because they can assist you in your investments and in identifying and tracking certain trends that can be beneficial for you.
FOMO is a phrase that many beginners come across as they begin their crypto trading journey. In this article, we will discuss what FOMO is and why it’s significant in the crypto trading industry.
What Is FOMO?
Originally, the phrase “Fear Of Missing Out” (FOMO) referred to the concern caused by the realization that other people are having a good or unique experience while you are missing out. It is a very popular notion on social media, with people’s feeds constantly sharing the positive elements of their lives, leaving the viewer feeling “depressed” about their own experiences.
In the cryptocurrency world, FOMO is a trader’s concern of losing out on a significant increase in the price of Bitcoin or other altcoins. A trader might detect a price change that seems to be a good indication for a certain coin at an earlier time when the price of a cryptocurrency fluctuates. It appears to be a good opportunity to buy when the price has already risen significantly. As a result, most traders sell coins for less in order to buy them for more.
Overcoming FOMO
Individual investors, or the market as a whole, might well be influenced by emotion rather than logic and reasoning when making investing decisions. This can cause a large asset bubble, increasing the risk of financial losses.
It is not easy to get rid of it. To deal with it, conduct your own research into cryptocurrencies before making investment decisions. Create a set of trading rules, or put restrictions on the amount of money you can lose or earn. Manipulation and misinformation are common in the digital currency world. One method is to artificially inflate the price and then dump or sell the cryptocurrency. Those who are afraid of missing out on a coin when its price increases often lose money when prices decrease.
Pros and Cons of FOMO
Pros
FOMO can offer some interesting trading possibilities. The following are its main advantages:
- Favorable buying and selling opportunities
- FOMO can drive the purchase of new currencies, thus exploring new opportunities
- It can serve as a useful guide for traders
Cons
FOMO has its own set of disadvantages. The main ones include:
- Can result in a complete loss
- It could lead to unreasonable trading
FOMO As An Advantage
Understanding FOMO might help you to avoid hopping on the hype train when it’s about to slow down or stop. It is important to note that you never know when something will stop, and Dogecoin is a great example of this.
When this cryptocurrency first started pumping in early 2021, everyone assumed it was a pump and dump that would not survive long. People said they would wait till the next day to invest because they didn’t want to fall into the FOMO trap. DOGE, on the other hand, continued to increase in value. Its price increased with each passing day, and while everyone anticipated it to burst like a bubble, it took a full 10 days to do so.
Lately, FOMO is being used on non-fungible token (NFT) projects. The founders of NFT projects are investing heavily in marketing, making it seem that every new NFT project is going to be a blue-chip project. This phenomenon is present among most blockchain networks, including the biggest smart-contract blockchain, Ethereum. However, people are getting more aware of such projects. This is leading to more careful and clever investments.
Moving on, FOMO does not always imply that the coin’s value will fall in a couple of days. As we saw with DOGE, the FOMO impact could last for a long time. However, if a community is pumping a particular currency for no apparent reason, the FOMO effect is likely at play. As such, you can expect the coin’s price to decrease in a short period of time.
Takeaways
- FOMO is a term used for “Fear Of Missing Out.”
- FOMO is a trader’s concern that they will lose or miss out on a price increase.
- You cannot get rid of FOMO, but you can control it to a certain extent.
- It is important to conduct research before making any investment decisions.
