If you were to ask someone what they would do if they had a time machine, a lot of people would say that they will go to the past and buy a lot of Bitcoin. Considering the fact that at some point Bitcoin was worth cents on the dollar, and now, even in these crypto winter market conditions it trades for around $26,000. The few rare individuals who believed in this asset from the start are probably sitting on some island drinking cocktails and enjoying their life, causing many to wish they had not missed out.
Because of this, whenever some word gets around in the crypto space about some particular crypto and that it might be the next Bitcoin, a lot of people start to jump on this asset with the hopes of making big money. This is what we call FOMO, and here we will explain what it means exactly.
What is FOMO
FOMO is an acronym for “Fear Of Missing Out”. It basically describes people’s fear of missing out on potential profits. This term is not specifically for the crypto market, and it can be used for anything, but it is a common term in the crypto community. Whenever a new cryptocurrency shows up, or some old token starts to suddenly gain value, a lot of people start to invest in this asset, just so they won’t miss out on potential profits that can be made from this rising token. A good example of mass FOMO is when Dogecoin suddenly started to gain huge value in a very short period of time. When Elon Musk tweeted about his love for this token, a large number of people started to buy into this meme token, and even though they did so as a joke at first, these buyers suddenly started to increase the price of Dogecoin, as more and more people started to join in. This created a FOMO, and people who have not dealt with crypto their whole lives started to open up crypto exchange accounts in order to buy this token.
Why is FOMO bad for the market?
FOMO is one of the worst things that could happen in the market. Whenever some token makes advancements and gains good value, a lot of people start to look at this token as a gold mine and invest in it with the hopes of making decent profits. But if the market suffers from a mass number of people fearing that they will miss out on the gold rush; so they will flood this currency and artificially increase its value in a very short period of time. What this means is that this currency is actually not worth that much, and no experienced trader will invest in this crypto. But since FOMO mostly affects inexperienced traders who don’t know what is going on exactly, they still buy into this token increasing the price even further. This creates a bubble and once it reaches a certain valuation, it pops due to a lot of people starting to cash out their profits. With people cashing out the price starts to drop and as more people see the price go down, they also start to cash out in order to not miss out on profits made up until then. This then creates a mass exodus, with the majority of investors leaving the project and dropping the value of this token even below its actual value. This eventually leads to this crypto dying out, or at least never reaching the heights it held at one point. This mentality of the mass market is commonly used by fraudsters who create FOMO using it as a Pump and Dump mechanism.
FAQs on what is FOMO
How can I spot FOMO?
If you are thinking that the price of cryptocurrency is increased by ongoing FOMO on the market there are a few ways you can check if it is so. The first thing you can do is check how fast prices have gone up, if you see a small rise followed by a huge spike it is most likely a FOMO. You can also visit social media platforms and check what people are saying about it (look at market sentiment).