Fear of missing out: how FOMO influences decision-making in the crypto market

The cryptocurrency market is known for its extreme volatility. Asset prices experience sharp jumps, creating both dangers and opportunities at the same time. While experienced market participants carefully monitor fluctuations and adapt their strategies quickly, newcomers often act too late. The reason lies in a psychological phenomenon called fomo — the fear of missing out on a profitable opportunity. This powerful but destructive impulse regularly leads traders to losses. Let’s explore what’s behind this term and how its influence manifests in the market.

The Origin and Meaning of Fomo

The term fomo (Fear of Missing Out) in the context of trading appeared in academic circles. In the early 2000s, researcher Dan Herman described this phenomenon in his scholarly works published in prestigious journals. Fomo is characterized by anxiety and worry that arise when a market participant believes they are the only ones missing out on a profitable trade.

When anxiety takes over, rational thinking recedes. People begin to act impulsively, without proper analysis of the situation. In the crypto market, this is especially evident: the value of an asset starts to rise, and tens of thousands of traders rush to enter a position. However, those succumbing to fomo usually join the movement at the final stage of the rally. The wave often peaks just when beginners make their purchase, leading to financial losses.

Comparing Fomo with Its Opposite Phenomenon

Fear of missing out has an antonym — jomo (Joy of Missing Out), or the joy of not participating. This state is typical for long-term investors who consciously ignore short-term volatility. They believe that the project is either promising (but currently overvalued) or dubious, and prefer to skip potentially profitable but risky opportunities.

If fomo pushes for action, jomo encourages patience and discipline. Professional portfolio managers often rely on jomo to stay aligned with their long-term strategy, even when the market experiences speculative surges.

How Fomo Distorts the Cryptocurrency Market

Fomo’s influence on the market manifests in multiple ways. When thousands of investors simultaneously succumb to the fear of missing a deal, strong demand pressure arises. The price of a specific token or coin jumps sharply upward, attracting even more buyers. This process creates a self-reinforcing effect and short-term price bubbles.

However, such artificial growth is dangerous. It generates extreme volatility that harms many market participants. Additionally, fomo opens the door for manipulators. Large holders of crypto assets — so-called whales — have learned to exploit collective herd mentality. They provoke bullish hype through certain signals, inflating the price bubble, then sharply dump their positions, profiting at the expense of mass losses among ordinary traders.

The Difference Between Fomo and the Related Phenomenon FUD

Two terms are often confused: fomo and fud (Fear, Uncertainty, Doubt). Although both are related to emotions, they act in opposite ways. FUD causes people to be overly cautious and miss out on good opportunities because they are paralyzed by doubt. Fomo, on the other hand, encourages impulsive action, neglecting caution. In practice, both phenomena hinder objective decision-making.

Strategies to Overcome Fomo

Managing fomo requires self-control and discipline. It’s not easy, especially when emotions run high, but it’s possible to develop protective habits. Here are proven approaches:

• Set clear goals. Define what profit you aim for and under what conditions you will close your position. This acts as an anchor that prevents impulsive actions.

• Conduct thorough analysis before entering. Study fundamental indicators, technical history, project news. Make decisions based on data, not emotions.

• Use risk management tools. Determine your position size so that even in case of a loss, the damage remains acceptable. Use stop-loss orders.

• Cultivate patience and personal discipline. Pause, take a deep breath, evaluate the situation with a cool head before executing a trade.

• Shift focus to long-term dynamics. Instead of reacting to every price movement, concentrate on promising projects and their potential over a year or more.

Long-term Investing as a Defense Against Fomo

One of the most effective ways to avoid fomo’s influence is to fully adopt a long-term strategy. Traders seeking quick profits are especially vulnerable to the fear of missing out. They constantly worry about missing a deal. But investors who buy assets and hold them for years are much more resilient to such psychological pressures.

A long-term position implies that short-term peaks and dips are noise against the overall trend. This automatically neutralizes fomo, as there’s no need to catch every price jump.

Summing Up: Is Fomo a Threat to the Crypto Market?

Overall, fomo is a significant risk both for individual participants and for market stability as a whole. This psychological syndrome causes people to abandon logic and act under the influence of collective fear. The result is often disappointing: impulsive purchases, huge losses, and frustration.

However, fomo is not an inherent property of the crypto market but rather a test of wisdom and self-control for each participant. Those who learn to recognize and resist it gain an advantage. That’s why increasingly experienced traders and investors constantly warn newcomers about fomo and develop specific tactics to neutralize it.