The Psychology of FOMO

If you don’t know what FOMO stands for, it’s “Fear of Missing Out.” It’s a fairly common term thrown around in cryptocurrency, and also in life in general.

The fear of missing out is a strong driving factor for someone to complete an action and avoid “missing out.” It’s not uncommon for us all to feel this to some degree. If you’re a day trader in cryptocurrency, you probably have had some sleepless nights spent checking CoinMarketCap.com or watching the candles for your favorite pair on your favorite exchange. If you’re not a day-trader, you’ve probably bought something because it was about out sell out. This is why FOMO is a popular marketing strategy. It works. People can draw on this strong unconscious urge and use it to their advantage. Does this happen in cryptocurrency? Well, it just might.

John McAfee and FOMO

Whether you like John McAfee or not, you can agree that he tends to talk about a lot of different coins, usually in a positive fashion. Now while we could get into his incentives or motives behind talking about coins, that’s another discussion for another day. For this post, we will focus on what happens community-wide in cryptocurrency after he does so little as tweet something about a coin. Let’s take a tweet from December, when John talked about Tron’s coin in a positive fashion.

So, John clearly believes in Tron for the long term. Again, we are more focused on what happens in the community after he says this than actually analyzing Tron. So, let’s take a look at Tron’s chart from the time he says this to a couple hours afterwards. Here it is:

Tron’s chart on December 26, 2017.

The FOMO Spike

Look at that spike in the price! Approximately 45 minutes after John McAfee says something positive about Tron, we see a direct spike increasing its value by over 25%. Shortly after, many others get out and it falls back down. I am fairly confident in saying there is a significant correlation between McAfee’s tweet and the steep increase in the price of Tron, because no other potential cause comes to mind.

This is just one example of something that happens all throughout cryptocurrency. Someone says something positive about a coin, many people rush in and sharply increase the price of the coin, and then the coin takes a big hit in price and after a while recorrects to a price that is closer to its previous value. It’s not an unthinkable phenomenon, as this kind of thing happens all the time.

Hype shouldn’t trump substance though. Someone’s opinion should not mean this much. Blindly following someone else’s recommendation is a bad idea, both in cryptocurrency and in life in general.

What You Can Do

The most important thing you can do is know your own biases, as well as everyone else’s. If you know that you fall for simple hype surrounding something, take a second to think about your actions before you go and follow the hype. Be careful blindly trusting a random person’s word, because words aren’t as meaningful as substance. Before you trust someone like John McAfee’s suggestion, make sure that what you are doing is more than just an unconscious urge backed by the fear of missing out. Do your own research before investing your own money into something. Know that if you do your research and end up missing out on a deal, there will be many more opportunities like it down the road.

Most importantly, what fear of missing out looks like, so you can be prepared when you see it.

About the Author

Hello, my name is Dylan Blomme! I am a student that spends my free time writing about topics that interest me, one of which is cryptocurrency. I have written a White Paper for an ICO as a freelancer, and I write my own detailed cryptocurrency articles at HonorableCrypto.com! My own personal favorite is, “Environmentally Friendly Mining: Crypto for Good,” in which I talk about how the power used for mining cryptocurrencies can be used for something good.

Thank you to Leonard for affording me the opportunity to write on Cryptohead.io!

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