What is FOMO in crypto and how to deal with it?
What is FOMO in crypto investments? American venture capitalist and writer Patrick J. McGinnis introduced the term FOMO (Fear of Missing Out) in 2004, referring to regrets about something very important that you may have missed, in other words, about life passing by again. Enough time has gone by since for the term to find its way into all conceivable market segments, and marketing has adopted it alongside others.
Meaningful abbreviations are flooding Wikipedia. Today FOMO is everyone’s favorite byword. Then, in response to FOMO, someone came up with JOMO (Joy of Missing Out, and there is also FOBO - Fear of Better Options!) and many other terms that could be fought with their own weapons, e.g., NIMBY (Not In My Back Yard, plus a whole line of its variations).
Having rolled down to the consumer level, a clever concept that we all are prone to envy, and that the vanity fair in social networks only heats up the emotions and prevents healthy sleep, has predictably become commonplace. Now it seems that everyone’s got FOMO and needs to do something about it: keep a diary, admit the problem, go swimming, visit a therapist, etc.
Crypto investing was no exception and has willingly sheltered FOMO. Since 2017 it has been a magnet for hotheads ready to turn blindly wherever they are called, while assuming that they are smarter than the rest. Well, frankly speaking, no one has died from FOMO yet, but since suffering is an inevitable component of human existence, it is better to suffer from FOMO than for other reasons, whose cruelty level life is not inclined to moderate.
Nevertheless, FOMO is indeed a problem in the crypto industry. It is, however, more like a soiled diaper problem in a kindergarten, rather than a life-altering choice that may change the fate of humanity. We’re not denying or avoiding the problem, it just needs to take its well-deserved place.
Now that the i's are dotted, and FOMO is in custody as a petty thief, rather than the godfather of a criminal syndicate, we can dig a little into its origins and finally answer the question of What does FOMO mean in crypto industry?
Examples of FOMO in crypto industry
They say that investors suffer unbearably when they don’t buy an asset that later grows rapidly and strongly. Presumably, they suffer less when its fate is the opposite. Also, investors don’t like it when someone earns, and they don’t. All these troubles push investors to new untested markets, where, overcome by greed, they make rash steps, buy everything they come across and lose even more as a result. And it’s all true and fair (if that makes anyone feel better, although what kind of fairness can there be on an exchange?) It's easy - replace the word “investors” with “people who want to earn a quick buck”, and everything will fall into place.
The ability to work and the desire to earn fill us with emotions of different quality. In the first case, the lack of profit is not always a failure, just as in the second the presence of profit is not always a success. The more primitive the goals, the more fertile the ground for FOMO.
Catching the next big move
The illusion that Bitcoin grew by 30,000% in 10 years once, thus, we can expect something similar to happen soon, and all you need to do is find IT (first), is no doubt harmful to a fragile mind. Treating one's abilities with due modesty, and even irony, is a good cure for FOMO, which feeds on the eternally tangled and fiercely competing feelings of superiority and envy, generously watered by greed. Say hi to FOMO!
A strong market movement is like a big fish: there’s no need to jump into the water where the water was just seething. Place your fishing rods where you like, and prepare yourself for the fact that fish may not bite today. Fishing is a process, and if it doesn’t bring satisfaction, it’s understandable why other fishermen cause you unbearable suffering (especially those who tell good stories). If you aren’t a good fisherman yet, nothing prevents you from becoming a good storyteller.
Avoiding the big losses
There is little chance of avoiding large losses with large investments. Small investments - small losses. Great expectations - great suffering. An impatient player will object to the typical “I set ambitious goals for myself!” However, he’s forgetting that he picked up this idea in a corporate environment where “ambitiousness” is just an element of motivation for tigers to jump through burning hoops for the minimum possible reward, and where whoever doesn’t jump is a loser.
Investments are not the place for “ambitious” goals, especially if you don’t work for an investment-related company. The most ambitious goal that you can set for yourself when investing in any asset is to survive. If you survived - you are already a winner.
Access to too much information
Excessive consumption is the main scourge of modern society, and it concerns not only food and other goods, but information, too. You can find excellent tips online on consumer hygiene. In the crypto industry, where anyone fiends for themselves - more so than anywhere else, informational hygiene is vital. Players who are prone to impatience should not read anything but dry facts if everything else has a destructive effect on them. They should not try to analyze where no analysis is required, keep drawing predictive graphs, multiply by 10 or 100 the numbers that are in no hurry to multiply themselves, share their ideas and be inspired by others.
You don't have your own perspective? All the more reason not to let the outside world provoke you to take active steps! Treat the internet as a kind of cauldron with garbage from the whole world, where you may sometimes, when you really want to, notice something that’s not what it seems - it’s best to just smile at it and pass it by.
There is no news in investments, except insider news, that can lead to rapid enrichment. Leave the stories about people who bought something yesterday and got rich on the conscience of those who set “ambitious” goals for themselves. Someone who takes the really smart steps will never tell you anything.
Enter early, win all
Want to be the first to skim the cream off a promising project? A great idea that refers us directly to risk management. Risk limitation is a term that can drive the most “ambitious” players crazy, but it’s crucial for survival. Find promising projects and invest in them; the question is - how much should you invest? As banal as it is, invest an amount that, if lost, will not affect your market “buoyancy,” that is, won’t sink you.
FOMO, the fear that someone managed to get ahead of you, is a good indicator of your misunderstanding and incorrect behavior. Are you concerned that there may not be enough money in the market for you? Believe it, there is enough fish in the river for everyone, even if you are the last to start fishing.
New, untested market
The desire to make money quickly and the related hype push many people into areas where they are completely helpless. The low crypto industry entry threshold and the lack of regulation allow you to “enter the market” in an hour and start buying up everything that moves. However, it’s better to learn to swim in shallow water, rather than leap from a cliff into the abyss. The fact that someone is already swimming should not mislead you - if a storm hits, he may well drown along with those who are just getting wet.
In reality, it doesn't matter if you’ve got a case of FOMO in a new market or in an old, “tested” one. The very fact of having FOMO should suggest that you still lack your own perspective on the market. We are not talking about some sacred knowledge that is deliberately hidden from you, but about the skills of reacting to events that can only be obtained by practice. You will have to pay for each lesson, but you’ll be able to choose how much you are willing to pay every time. Learning is useful. By the way, students are much less likely to experience FOMO than those who have already “received a diploma and found a job.” In that sense it’s better to remain a student forever.
Psychology behind FOMO
At the heart of FOMO are primitive human feelings, which by no means makes FOMO less dangerous, rather the opposite. The desire to get rich quickly (greed), the desire to do it first (envy) and show everyone (pride) takes us to the list of humanity’s fundamental sins, or at least to Brad Pitt with a broken face and a box in the middle of the desert. However, when investing, emotions can evolve into more complex forms.
FOMO forces you to buy at the highs and sell at the lows, because at these moments the crowd provoking the growth or fall of the asset is in its most excited state: if you are part of it, there is no chance to act otherwise.
FOMO forces you to constantly monitor your open positions, which, like a weather vane of your competence, constantly demonstrates an investor’s foresight or mistakes as he demands proof of his own rightness.
FOMO requires non-stop consumption of news and communication in social networks in search of support for an investment idea.
In short, FOMO provokes you to play and demands to experience emotions every second and for as long as your health will allow. These games have nothing to do with investing. On the other hand, “investing” is also an inappropriate word for those who have decided that they have conquered FOMO and now see themselves as experienced players. The desire to be called an investor often has the same roots as FOMO itself. But the title does not provide long-term anxiety relief. The best position to take is "I just buy low and sell high, and sometimes I succeed (just like many others)".
Signs of FOMO to watch for
The main sign of FOMO is anxiety and poor-quality sleep as a result.There is nothing wrong with wanting to buy something that is growing strongly. How you feel afterwards is an entirely different matter. If you fall asleep fully satisfied and sleep soundly - great. If you watch the position all night and buy more in the morning - FOMO is here.
If you really want to buy an asset, buy it, but spend an amount that won’t keep you up at night. It’s a rather fine line - to invest just enough so that it does not painfully hurt either when falling or when growing. Those unable to find this line yet should take a step back and think about their goal - what will happen in a week, a month, a year? Are these emotions worth repeating everything in a week?
But let's say the position is open, and the investment amount seems reasonable. If the investor is overcome by thoughts about what will happen if the asset grows ten or a hundred times - it’s also FOMO. Any position has two points - an entry point and an exit point. You can enter well, but exit badly, and vice versa. Getting out well is sometimes harder than entering well, so a good entry point is only part of success. In addition, the less affordable a position is for you, the more unnerving it is. If worrying about an open position is interfering with your sleep, then FOMO is here again, and there is no doubt that it’s here to spoil the profit-taking process.
FOMO can go further and cause an obsession with social media and discussions on where and how the crypto asset will move. Perhaps this is the worst thing that can happen, because no one is ever right in a crowd. As soon as you become a part of the crowd, you lose the ability to learn, your behavioral model is altered, and the final destination changes with it. For a crowd, this destination is always the same - licking your wounds in dire straits. Someone will get lucky today. But luck is a random traveling companion, not a friend for life.
How to deal with FOMO
Awareness is the first step. FOMO does not lurk in the depths of consciousness, it is so clearly on the surface that you can’t miss it. All you need to do is admit that it’s there, preventing you from living a normal life. FOMO is not a drug or alcohol, but you pay for it with lost time, and it is difficult not to agree that these emotions were in vain, expectations were imaginary, and communication in social networks was useless.
We are really capable of wasting a lot of time on illusions, and may not believe that actual results can be obtained only when emotions are out of the picture. For novice players, this may look contradictory- why play if there are no emotions involved? (“I feel driven when I work in the market!!”) However, with investments, the joy of playing is nothing compared to the satisfaction of getting results, and to get results, you can't give FOMO a single chance.
What is FOMO: FAQ
What is FUD and HODL?
FUD - Fear, Uncertainty, Doubt - the flow of negative information about the crypto industry, specific projects, tokens, etc., i.e., deliberate misinformation aimed at slashing the price of an asset, spreading unverified rumors, flooding in networks, etc.
HODL - legend has it that someone made a typo and wrote I AM HODLING, instead of I AM HOLDING, to which the community proposed a new abbreviation - HODL, or Hold On for Dear Life. It means holding a long position in Bitcoin regardless of the circumstances for the sake of a “great future."
What causes FUD in crypto?
FUD may be intentional, but for the most part it is the product of “hotheads” diligently sharing their ideas on the Internet. FUD is partly a consequence of FOMO; it allows players to let off steam and indicate their involvement in the process. FUD in the crypto industry is usually based on some real foundation, the quasi-analytical interpretations of which bring the discussion to a panic level. This may provoke identical actions of many market players, leading to real movements of a particular asset’s price.