on the crypto
2022 took a drastic turn for the worse for investors of all types. After a period of accommodative monetary policy by the Federal Reserve, interest rates were raised to fight inflation. The best times are over (for now) for risky assets like cryptocurrencies and high-growth stocks.
The question that arises is this: How can investors avoid FOMO when it eventually comes back? And what is FOMO? Here's what you need to know.
What is FOMO?
FOMO stands for “fear of missing out”. It is a feeling of anxiety that is often experienced when others are having fun (or talking about having fun). In the cryptocurrency industry, many investors had FOMO in 2020 and 2021, when the prices of many cryptocurrencies were skyrocketing. These emotions were amplified by frequent social media posts from people advertising their incredible investment returns that changed their lives by buying the right cryptocurrency or digital asset (like NFTs) at the right time.
FOMO in cryptocurrencies and investments explained
The human brain is predisposed to social experience. In the right dose, FOMO is a healthy feeling that pushes us to seek friendship or motivates us to try new experiences.
But FOMO can manifest itself in all sorts of situations where it is not so good. One of these is investment. For short periods of time, markets are dominated by two basic human emotions: fear and greed.
Frequent observation of other people making a fortune quickly, especially if heralded on social networks or among peers, can lead to emotional decisions. FOMO may prompt some investors to follow the crowd on a popular cryptocurrency project or other high-growth investment without fully understanding the risks involved. But fads are common in the investment world. What rears up in a moment can quickly collapse, and FOMO (driven by collective greed) can transform from fear of losing the fun to fear of losing hard earned money.
The market turmoil in 2022 proves this. Lot of investments in cryptocurrenciesThe once hugely successful have lost the support of early fans, leaving latecomers dumbfounded as prices plummet.
How to avoid FOMO
Fear and greed move markets (stocks, cryptocurrencies and the like) in the short term and trying to chase the thrill of the moment can lead to disaster. But overcoming our basic human desires is easier said than done. Here are four exercises to avoid investment FOMO when the next bull market arrives.
- Understand that investments are based on the long term.
- Focus on goals, not just on making money
- Build a portfolio, not a collection of useful tips.
- Everyone has an agenda and they rarely have your best interests in mind.
