FOMO stands for “Fear Of Missing Out”, and this refers to a person making crypto investments based on some piece of information or sharp price movement, without doing any proper analysis or verifying the source of information. For example, traders might see that prices of certain cryptocurrencies have jumped significantly and a lot of people are making profits. After seeing this, these traders might invest in this cryptocurrency, as they fear missing out on these profits, but in most cases, they end up purchasing these cryptocurrencies at a very high value and end up losing money, as prices start to fall.

This is one of the worst problems in the crypto market, which is very volatile, and a small fuss about a certain crypto can be enough to create confusion and panic in the market. Because of this, whenever we are looking at different crypto trading risk management guides, one of the most important rules is to always make calculated decisions and don’t invest blindly. 

Now let’s take a look at the real-life example of FOMO. We all know Dogecoin and its connection with Elon Musk. In 2021, Musk made multiple comments regarding his love for this cryptocurrency, which caused the Dogecoin price to become very volatile. When Musk made this comment, people actively started to see prices go up, but then suddenly crashed. This was one of the first examples of FOMO associated with Dogecoin and Elon Musk, and it did not take long for another FOMO to occur on the market.

A lot of people remembered how Musk's comments made the price of Dogecoin jump, and in a few weeks, Musk made a few more comments about the token. This was just before Musk's appearance on Saturday Night Live, and just before the show aired, the price of Dogecoin skyrocketed once again. During this time Dogecoin was showing a 1000% increase in price in the last month. But right after the show, prices started to fall again, and within 24 hours, the price was down by 30% from its peak, and this downfall continued until Dogecoin returned to the valuation it had before Musk’s comments. 

While a good number of people profited from this price jump, way more people lost money due to FOMO. The majority of people who bought into this token bought them at a very high price, and since most of them were newcomers, they had no understanding of taking profit or stop-loss orders. Because of this, the majority of people who bought into Dogecoin during this time, lost quite significantly, with most of them never returning to crypto after this. 

While it seems easy to avoid FOMO by simply not jumping on hype trains, there are still different steps that traders should take, to make sure they don’t fall victim to it and still make profits. Simply not buying into crypto that is performing well is a bad idea since there can be a legitimate cause for this increase, and investing at the time might be a good decision. This is why it is important to know how to avoid FOMO, while still being able to freely invest and trade with cryptocurrencies and take advantage of every good opportunity.

Stop looking for the next Bitcoin

When most people join the crypto market, they are hoping to find the next Bitcoin and make very big profits. When joining the market with this mindset, it brings a lot of bad habits to traders and limits their opportunities. When we see that a cheap cryptocurrency is gaining value significantly, we might think that, here we go, we found the next Bitcoin. But what happens here is that millions of other people think the same and start buying into these cryptocurrencies. This causes the token to be overpriced and once a few people start taking out profits, prices start to fall drastically, and our next Bitcoin returns to its previous value, or in some cases, it goes even lower. 

Because of this, it is best to trade with already-established cryptocurrencies. While their prices might not show 100% - 200% movements, they tend to be less volatile and their price movements have something behind them, other than FOMO. 

This does not mean that we should not buy into new cryptocurrencies, but when doing so we need to do it wisely. We should analyze the crypto really carefully, see what benefits they are bringing, what potential it has, and so on. After this, if we see that it has a good future, we can invest in this token, but we should only invest an amount we are ready to lose. 

Don’t believe everything you read online

Nowadays we have access to an unlimited amount of information, which can be both beneficial and bad, depending on how we look at it. Fake news has become a hot topic of discussion in the last few years, as more and more people gain access to the internet, spreading false information and misinforming the masses has become extremely easy. 

This is popular in the crypto space, where prices of tokens move based on belief and misinformation can be used as a tool to shift the market in your favor. Because of this, we should never believe everything that we read online and always analyze and double-check everything. We might stumble upon a news article stating that a certain crypto is a good investment opportunity right now. While in some cases it might be correct, there is a bigger chance that this is simply misinformation scam designed to make people invest in this token and artificially inflate the valuation. 

In order to not fall victim to this fake news, we should only read the info provided by reputable sources and always double-check the information. There is also the problem of an open market. The crypto market is an open market and prices move depending on the demand and supply. When news gets out that a certain crypto is a good investment opportunity, we are not the first person reading it. Because of this, a lot of people will be doing the same thing, and when a lot of people invest, prices will go up sharply, and they will then soon drop sharply as people will be taking out their profits. 

FOMO is one of the biggest enemies of the crypto market and it has damaged quite a lot of traders. This is pure psychology of the masses and removing this from the market is impossible, at least for now. Because of this, traders should always make calculated decisions when investing or trading with cryptocurrencies. While sometimes it is good to read up on certain news and investment suggestions, it is always better to do our own research and analysis and invest based on this. Public news affects the market very sharply and this might cause the market to move in different directions, while our own analysis is ours, and way fewer people will be doing the same thing we are. Because of this, our own analysis will be more accurate and profitable, if we know what we are doing.