In the past one decade, we have seen the emergence of cryptocurrencies from an obscure digital asset concept to an exponentially thriving 2.6 trillion $US economy. Today, cryptocurrencies have been embedded into people’s lives as they use them for varied purposes, from everyday shopping to trading and investments to even betting on the best online crypto casino and video games.
In the past one decade, we have seen the emergence of cryptocurrencies from an obscure digital asset concept to an exponentially thriving 2.6 trillion $US economy. Today, cryptocurrencies have been embedded into people’s lives as they use them for varied purposes, from everyday shopping to trading and investments to even betting and video games.
Use of blockchain technology and decentralized finance has ensured that cryptomarkets turn into democratic spaces where both seasoned and novice customers can maximize their potential with the right tools.
Crypto indeed is the new gold and everyone’s invited to the quarry !
Although the crypto ecosystem relies heavily on advanced technology, deep market sense and complex algorithms, it is however a very basic human trait that often decides the cryptocurrency’s value in the market.
The internet calls it Fear of Missing Out (FOMO), a phenomenon where decision making of investors is less dependent on market analysis, knowledge and logic, and relies heavily on fear of missing out on golden opportunities. As the famous english proverb says, “make hay while the sun shines,” the FoMo factor thrives on the fear factor where people take decisions that are not thoroughly investigated and follow what the other persons are doing.
While the internet definition of the term FOMO is fairly new, the human emotion is quite old. In fact, it starts entering our subconscious at an early stage in childhood. Have we not seen a child throwing tantrums at his parents demanding them to buy him the exact new bicycle that his best friend in his school just purchased? FOMO works on our minds in a way that it makes us believe that if we are not part of a hype, then we tend to lose big. In the same manner, crypto investors often give into FOMO and make investments that are based not on analysis or reason but by following the footsteps of their favourite influencers or ‘X’ trends. The crypto ecosystem resembles that of a typical community, wherein many people might make irrational, wrongful, unjustified, or even erratic decisions just because they don’t want to miss an opportunity that they, themselves feel, that others are leveraging.
After Bitcoin’ value experienced an exponential surge, a huge number of investors in 2021 decided to buy Dogecoin based solely on tweets by entrepreneur Elon Musk on ‘X’. The investors did not rely on market research and decided to put their faith in a newly introduced digital currency, hoping its value will also shoot up exponentially. The fear that they will miss the ship if they stay in calm waters drove their decision making.
FOMO acts as a motivator, making people do things that otherwise they wouldn’t do. This means that many times it leads to greater risks, exposing individuals to dangers concerning their decisions. Investing in no-value projects and bubble cryptos, for example, is one such danger. Taking decisions based on FOMO is similar to crypto gambling and less like an actual investment, where all the pros and the cons have been considered and the assumed risks are known or at least estimated to a point by the investor. The investors decide to make a move just for the sake of being part of the “hype” .
There are many facets to FOMO, depending upon person to person, and it is also expressed in different ways. A few of the rationales behind FOMO are:
* Be the one to make the next big thing: investors may buy certain cryptos because they believe they will be the ones that will stand out in terms of leveraging opportunities and be the first ones to make the move
* Avoid forthcoming losses: investors may make quick and irrational decisions because they believe that everybody else will prevent themselves from losing big time, so it is necessary that they do the same thing as well.
Early riser’s gain: Investors will also act fast in front of a new, emerging trend because they believe that the early adopters are the ones to win it all in the end.
Any of these behaviors may imply FoMO and while many crypto investors don’t realize it now, it is a factor that distorts their ability to make informed, well-considered, and thoroughly addressed decisions.
