Many investors are afraid of missing out on profitable investment opportunities. This fear is expressed with a special term: Fear of Missing Out (FOMO). FOMO is a term that is very familiar in the cryptocurrency world. It is a situation where people make irrational and unexamined investment or trading decisions.

Studies have shown that FOMO is more common among people aged 18 to 35. However, it is not limited to this age group. Keep reading to learn what crypto FOMO is and how to deal with it.

What is FOMO in crypto?

Crypto FOMO occurs when someone invests or trades based on information they hear without properly verifying it. Because of this, people often buy assets at high prices, when they could have bought them at a much more profitable price with a little more strategy.

Sometimes, crypto FOMO not only causes financial losses, but it also negatively affects mental health and personal life. This can lead to problems such as family isolation, anxiety, and depression.

Health risks associated with FOMO

If someone loses a large sum of money through a bad investment, it can be very damaging mentally. This can cause the person to lose touch with their relationships, family, or friends. If not taken care of properly, it can lead to social and emotional decline.

In an 80-year Harvard study, Robert Waldinger noted that our relationships and our happiness in them have a profound impact on mental and physical health. This opinion also applies to crypto investments.

Examples of FOMO in crypto

In 2023, a rumor spread that a spot Bitcoin ETF had been approved. Due to this rumor, the price of Bitcoin increased by $2,000 within a few hours, although it later fell back.

FOMO in the crypto world encourages many to invest in shitcoins without verifying it. However, it is very important to do proper research and make a rational decision before investing in any cryptocurrency token.

Causes and Solutions for FOMO

Fear of Missing Out (FOMO)  arises in the cryptocurrency world for a variety of reasons. Understanding and identifying these causes is very important, as it can help you control such emotions in the future. Below are some of the main reasons that can be helpful in overcoming FOMO as a crypto trader or investor.

1. Trying to catch the next big opportunity

After learning how much early investors like Bitcoin or Ethereum have made, many people become anxious to catch the next big opportunity. For example, the price of Bitcoin has increased by 68,000% (as of July 28, 2024). Such profit stories often create FOMO.

2. Fear of avoiding big losses

FOMO is not only about profits but also about avoiding losses. For example, in 2022, the TerraUSD (UST) and Luna stablecoin crashes caused about $50 billion in losses. Trying to avoid such losses forces people to make hasty decisions.

3. The effect of excess information

Information is very important in the crypto world. However, when there is a lot of information available from different sources, it can increase FOMO. Especially, if that information is not verified.

4. The "Being First Means Success" Idea

Many people believe that those who invest early in cryptocurrencies like Bitcoin are the most successful. This idea encourages people to rush into new and untested cryptocurrencies.

5. New and Unregulated Market

The crypto market is relatively new and largely unregulated. Since the barriers to entry are low, even less knowledgeable investors can come here. This situation causes many to suffer from FOMO.

How to recognize the signs of FOMO?

In addition to identifying FOMO, it is also important to recognize its signs in yourself. Below are some common signs of FOMO:

• Feeling that if the price of a cryptocurrency suddenly increases, you will miss out.
• Wanting to invest in a crypto asset that has recently become popular.
• Constantly thinking about how much profit a trade could have made.
• Extreme addiction to crypto trends and social media.

This type of behavior suggests that greed can force people to make risky decisions. Such decisions are usually irrational and short-lived.

How to avoid FOMO as a trader

1. Take time to research

FOMO is often caused by information coming from various unknown sources, which is often unverified. As a crypto investor, it is very important to do your own research on the true state of the currency before making any decision. This will protect you from irrational decisions, which can lead to losses.

2. Rely on reliable sources

Another good way to avoid FOMO is to gather information from trusted media outlets and experts. Information obtained from such reliable sources will help you make better decisions when buying or selling crypto assets. Analyzing the information will help you determine the right investment path.

3. Accept that there will not always be profits

Just as there are ups and downs in life, so is the case with investing. There will not always be profits, and sometimes there may be losses. Accepting this reality makes an investor more rational and patient. Setting a strategy to avoid losses is one way to avoid FOMO.

4. Create a strategy

Create a guiding strategy to protect yourself from FOMO. This can be a rule for your decision-making, such as checking the token mix or usage pattern before making an investment. Think carefully by combining fundamental and technical analysis, so that you can protect yourself from making the wrong decision.

5. Learn about market cycles

The cryptocurrency market, like other financial markets, moves in cycles. It is sometimes in a bull market (price increase) or sometimes in a bear market (price decrease). Knowing about this market cycle will give you the opportunity to trade and make decisions at the right time, which will help you avoid FOMO.

6. Learn from past mistakes

One of the best ways to avoid FOMO is to learn from previous mistakes. Imagine, you once sold Bitcoin believing a rumor, but its price later increased. Learn from this experience and try to avoid such mistakes in the future. Learning from past mistakes will protect you from future risks.

Remember, FOMO can be a tool for scammers

Since the popularity of cryptocurrencies, many initial coin offerings (ICOs) have come to the market. Some of them are genuine, but most are scams. Scammers use FOMO to lure people into investing in a hurry so that they can easily get their money.

One study found that about 80% of ICOs are actually scams. Another report said that small crypto scams cause about $9 million in losses every day. When FOMO influences your decisions, many fake projects can seem real. Therefore, it is very important to be aware of this.

Ways to avoid scams

To avoid FOMO and not fall victim to scams, there are a few things to remember:

1. Do your due diligence: Before investing in a project, analyze its authenticity and effectiveness thoroughly.

2. Follow trusted sources: Rely only on information from reliable media and experts.

3. Don’t be overly enthusiastic: Don’t make any decisions based on the hope of a sudden gain.

Lessons from history

FOMO is not unique to cryptocurrencies, it is a natural human tendency. During the 19th century gold rush, people spent huge amounts of money searching for gold. Most people lost their wealth due to this risk.

Similarly, FOMO can cause serious losses if you are not careful when investing in crypto. For example, the once popular crypto exchange FTX was considered profitable and trustworthy. But after its fraud was exposed, it collapsed. As a result, many people lost their savings and even their homes.

Conclusion

FOMO is a powerful emotion that can influence our decisions. However, if we cannot control it, we can suffer major losses. To protect ourselves, we need proper information, research, and investment strategies. Patience, awareness and the ability to make good decisions are essential to succeed in cryptocurrency or any risky investment. So, act rationally instead of emotionally and protect your assets.