Surely, newcomers to the crypto market have heard at least once about FOMO syndrome. But they may not fully understand what this term means. So, what is FOMO? Can FOMO affect investors' or traders' decisions?
What is FOMO?
FOMO (short for Fear Of Missing Out) is a term used to describe a psychological syndrome of fear of missing out. FOMO reflects feelings of anxiety and unease stemming from the thought that one might miss something important or valuable. What is missed here refers not only to material things but also to other aspects such as experiences, opportunities, social interactions, etc.
FOMO appears in most forms of financial markets, such as stocks, crypto, and even in marketing-related industries like marketing and sales... The common point is that it impacts the psychological aspect of investors/users, often referred to as the 'FOMO psychological trap.'
In the context of the crypto market, FOMO refers to the fear of missing out on potential profits from trading cryptocurrencies. When experiencing FOMO, some common signs that investors or traders may exhibit include feeling overwhelmed, driven by anxiety, fear, and greed. This leads to hasty buying or selling decisions without a clear strategy or thorough research.
The mentality when experiencing FOMO
According to trading psychology, most traders exhibit FOMO when the market is near the peak of a bull run.
At that moment, the market sentiment is positive, and the token price is on an upward trend. Traders often believe that this trend will continue and that they can earn more profits if they buy right now, regardless of how high the token price is.
It can be said that FOMO will dominate a person's actions due to two main emotions: fear and greed.
Therefore, a person experiencing FOMO will show the following signs:
Feeling anxious, obsessed, and constantly checking the price of the token, open trade positions, and invested amounts.
Always feeling the need to follow news and trends on social media and news outlets to seek profit opportunities that they think have potential.
Rushing to make a buying or selling decision just because a token is 'hot' or has significant price fluctuations without any strategy or research on the associated risks.
For example: Suppose you have no intention of buying any coins. While checking information in crypto investment community groups on Telegram, you suddenly notice that many groups are discussing a partnership between a large company and project A, and the token for this project is likely to surge.
At this point, you check the price of token A and see that token A is continuously rising, even rising very fast. Right now, you will feel that if you don’t buy token A, you will miss the opportunity to profit.
After that, you decide to buy token A regardless of how much its price has increased beforehand. Thus, it can be said that you have fallen into FOMO.
Who creates FOMO in crypto?
FOMO creators can be projects, organizations, or individuals with influence (KOLs) in the crypto market to serve their own interests.
Accordingly, FOMO is used as a tool to push the token price up high with the aim of creating liquidity so that the FOMO creator can take profits. Typically, they will have control or significant influence over many media channels, thereby affecting the actions of as many people as possible.
Specifically, through news outlets, social media, and community groups, KOLs will continuously mention the token they want to create FOMO for in various ways, including:
Talking about the profit potential of the token.
Continuously posting images showcasing their profits with that token to stir the greed of others.
Organizing events that require others to buy tokens to enjoy the privileges they provide.
Therefore, FOMO can be a powerful tool for projects, organizations, KOLs, etc., but it has negative effects on investors and traders due to the consequences it brings.
What are the consequences of FOMO in crypto?
Mentally, FOMO causes feelings of unease, anxiety, and fear for investors and traders. In worse cases, if this condition persists, it can lead to depression for those experiencing FOMO.
In terms of decision-making, FOMO often leads to irrational and hasty decisions in crypto trading. This can easily cause those affected by FOMO to fall into the situation of 'buying at the peak' when buying tokens at the highest price. The continuous psychological cycle of FOMO will gradually decrease their assets over time.
Ultimately, the greater consequence of FOMO is that it causes investors and traders to lose faith in their own judgments and decisions, as they have previously suffered significant losses due to FOMO. And once they no longer trust themselves and only rely on others, their assets are likely to quickly approach zero.
4 ways to overcome FOMO psychology when investing in crypto
In reality, it seems that FOMO will never disappear; no one can completely avoid the FOMO mentality when investing, regardless of their level of experience.
However, some ways to minimize the state of being affected by FOMO include:
Learn and research thoroughly (through technical analysis, fundamental analysis) to make reasonable investment decisions. Avoid hasty actions when being 'shilled' or relying solely on price fluctuations at a certain moment.
Always have a trading plan before entering an order. There must be a stop loss point, an entry point, a target point, and a capital allocation plan before trading.
Be steadfast in following your trading plan. If a change in plan is necessary, the investor or trader should consider combining many factors (market trends, price fluctuations over a period of time, etc.) to have a flexible and appropriate change plan.
Limit trading or investing based on news events. At the same time, focus on closely monitoring the market to develop market sensitivity.
