Have you ever read on Facebook that the Bitcoin price hits all-time high again and you feel an insuperable desire to buy Bitcoin right after the news? Congratulation, you got FOMO. But is it wise to just jump into something like that? Let’s see what is the background of FOMO and how to cope with that to make a rational decision at the end.
What is FOMO?
FOMO is the short acronym for ‘Fear of Missing Out’. According to the urban dictionary, FOMO is a form of social anxiety – a compulsive concern that one might miss an opportunity It is often aroused by posts seen on social media websites.
The literal meaning of the sentence ‘Fear of Missing Out’ seems obvious to everyone. But nowadays, when social media penetrates to our everyday life much more than it should be, the occurrence of decisions based on the FOMO feeling has been increasing day by day.
The feeling of missing out carves deep into our soul and you might feel a huge amount of envy. It can even affect your self-esteem in the long run if you are not aware of what is happening.
A couple of years ago Bitcoin was traded at $1 while at the end of 2017 it reached as high as $20000. Imagine if you have invested just $100, you could have been a millionaire by now – this is what some pictures on social media want you to think so. This can lead you to irrational decisions and investing without a clear strategy in Bitcoin in a short amount of time – probably resulting at the end with big losses.
Psychological background of FOMO
FOMO or ‘Fear of Missing out’ refers to the feeling or perception that everyone around you has a better life and you miss some great opportunity. In most of the cases, it is just a perception, not the reality, since nobody is showing the real life challenges on social media, but prefers glory and pride.
The feeling of FOMO can found you in various situations and not limited solely to social media interactions. Although many people are glued to smartphones to check status updates from Facebook and Instagram and checking updates when they are on a meeting or date, FOMO happens outside of the social media circle too. Actually, you are making a lot of FOMO decisions throughout the day you might not be even aware of.
Have you ever interrupted work to answer right away to a phone call or respond to an email? That was a FOMO decision.
We all have a friend, who just say yes to a romantic relationship because it seems everyone is a couple around and she just does not want to miss the opportunity to be happy.
That was a FOMO decision.
Or on the other hand, there are other friends, who are stepping out of a relationship because everyone is single around him.
That was a FOMO decision.
The term FOMO was defined in 1996 by Dr. Dan Herman, who observed the phenomenon during conversations with customers talking about products. The word “FOMO” was officially added to the Oxford Dictionary in 2013 and nowadays FOMO is something marking experts use a lot to increase product sales.
FOMO and Bitcoin
In terms of investing FOMO can lead you to irrational decisions and eventually unnecessary losses.
The bitcoin hype happened at least two times during the past decade. In 2013 Bitcoin price increased from $123 in September all the way up to $1166 in December. Something similar happened in 2017, from $3000 in September to $20000 December. You could have made 100x times your original investment. And it might be happening right now too, as during the past couple of weeks Bitcoin’s price has tripled already.
People went crazy during the prior cryptomania periods and many of them bought Bitcoin near or at the top. So when soon after reaching all time high levels Bitcoin have crashed, these investors saw their money literally evaporating and eventually have them close at the bottom.
A good indicator of Bitcoin FOMO is Google searches. When the mainstream media start to talk about Bitcoin prices the interest about Bitcoin and cryptocurrencies is raising. More and more people are looking for information about what is this magical thing that can double, triple your investments within days. The best indicator of FOMO and that we are near the all time high when your grandmother asks you how can she buy bitcoin.
How to overcome FOMO?
1. Admit you got FOMO
The first and biggest step is to realize you might not be acting rational and you are in the state of FOMO. If you are able to admit to yourself that you are in an emotional state when you feel you are missing out a big buying opportunity on Bitcoin it means you are ready to face the problem.
External information will always influence your decision but do not rely solely on some memes shared on social media where prior Bitcoiners are riding Lambos. It is very possible that Bitcoin price will never be traded at $1 as it used to be, so the amount of profit you can get is not as high as if you were one of the pioneers. Accept this fact and it will help you a lot in terms of looking at the current situation with a clearer head.
2. Step back and reevaluate
The second step after accepting you are in FOMO mode that you try to look at the situation from an external point of view.
Remember the quote from the world’s most successful investor, Warren Buffet:
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
Buying the dip is never an easy thing. But when everyone on the market is looking for buying Bitcoin – even your grandma! – then try to remember the above and see if you should be greedy or fearful.
3. Have an investment strategy
It is nearly impossible to time market perfectly right. You might miss the absolute minimum for buying and the absolute maximum for selling. But you can still generate some nice trading profit even if you miss the absolutes.
One solution can be to use dollar cost of averaging. In this case, you can set pre-agreed dates when you will buy (or sell) Bitcoins – no matter what is the price. If you do this constantly over a longer period of time, you will realize you managed to purchase and sell on average. You might missed the absolutes, but you still generated an average (good!) revenue.
If you decide to follow indicators and analysis, make sure you have some kind of investment strategy in place. Set profit goals you want to reach and don’t be greedy. Remember,
“A bird in the hand is worth two in the bush.”
4. Know what you are doing
And finally, but most importantly, make sure you know what you are doing. Get to know the product – cryptocurrency – you are dealing with. Be aware of your own financial situation, how much money you can afford to lose and how much risk are you willing to take. Each investment decision must be made personally tailored to your specific situation. Do your homework BEFORE you risk your capital.