The ubiquitous influence of fear of acting (fomo) on cryptocurrency
In recent years, the world of cryptocurrency has experienced enormous growth and enormous popularity. The increase in decentralized financing (defi), initial coin offers (ICOS) and the increasing accessibility of digital wallets have made it easier for people to deal with the market. However, behind this excitement there is an uncanny strength: fear of exchanging (Fomo).
Fomo is a psychological phenomenon that describes the fear and pressure of individuals if they are unable to participate in a certain trend or event. In the context of the cryptocurrency trade, FOMO can be particularly harmful and investors can make impulsive decisions more on fear than on careful analyzes.
The psychology of fomo
Studies have shown that Fomo is closely associated with cognitive distortions, such as:
- Confirmation bias : Investors tend to search for information that confirms their existing views and ignore contradictory evidence.
- Availability Heuristik : The availability of news or information in connection with a certain event can create the illusion of its importance and cause investors to overestimate its importance.
- Lossa version : The fear of missing potential profits is more harmful than the fear of missing losses.
How Fomo influences cryptocurrency trading
Fomo can manifest itself in different ways on the cryptocurrency market:
- Herd behavior : If a large number of investors buy or sell cryptocurrencies at the same time, prices tend to behave with those who are most active.
- Social proof : Investors can feel the pressure to join the “winners” and to follow their colleagues instead of an independent evaluation of the diligence of the individual cryptocurrencies.
- Price impulse : FOMO can drive forward proposals based on emotional reactions to price fluctuations and not to rational analysis.
Examples of FOMO-controlled shops
- Binances Price drop (2019) : The sudden decline in Binance Coin (BNB) sent shock waves through the market, which caused many investors to sell their investments in masses. This led to a strong drop in price and significant losses for those who had not taken any steps to secure their assets.
- Elon Musk Twitter controversy (2018) : The tweets of the Twitter CEO over the Tesla share price led to an increase in purchase activity, which in turn increased prices. However, this followed a sharp correction when investors recognized the risks associated with the rally.
Milder Fomo in cryptocurrency trading
While Fomo can be a strong force in cryptocurrency trading, it is not insurmountable. Here are some strategies with which you can navigate on the market and make more informed decisions:
- Diversification : Spread your investments over several cryptocurrencies to minimize the commitment in a certain asset.
- Carry out thorough research : Take the time to learn more about the underlying technology, application cases and market trends of the individual cryptocurrencies.
- Set clear goals and risk management strategies : Determine specific investment stems and realistic risk parameters to make more well -founded decisions.
- Stay informed, but avoid emotional decision -making : Stay on the latest with market messages and analyzes, but avoid getting involved in fear -based emotions.
Diploma
The fear of the absence (FOMO) is an ubiquitous force in the cryptocurrency trade, which can have significant consequences for investors who are not willing to navigate with high stakes in this environment. If you understand psychology behind Fomo and take steps to alleviate your effects, you can make more informed decisions and achieve your investment goals. Remember, caution is always the key when you deal with the world of cryptocurrencies-but it is also important to keep vigilant against the temptation of the terrified decision-making.
