Confessions From a Cryptocurrency Investor - Part 1 FOMO and FUD

Read time: 7 mins

When was the first time you heard of bitcoin?

Was it around Nov 28th, 2013? How about Jan 2nd, 2017 or May 22nd, 2017? No, what about April 6th, 2017 or Aug 17th? Okay okay, final guess - Sept 2nd?

Or what about only a few days ago?

Chances are you are like me, and millions of other people, you first heard about cryptocurrencies when bitcoin was making record highs. It was in the news, it was on tv, even that strange coworker who you dismissed in the past was even talking about it.

So what did you do?

Of course, you ran out and bought some as soon as you could. I did it. I'm betting 99% of you reading this did it. And I'm betting 99% of everyone else did it as well.

And then what happened? The price went down, right?

It is almost funny if it wasn't so so true and how history has a funny way of repeating itself.

BTCUSD

Seriously, who is buying at these highs?

I didn't just pick those days out of a hat. Each one is significate and if you haven't guessed or know, each one is when BTC hit another $1000USD. And each time people thought, this is crazy, I have to get in on this. I might miss out!

FOMO

Fear Of Missing Out. It is a strong emotion. I get it. And I'm guilty of it. Yes, my first confession is "Hi my name is, and I too have FOMO'd."
It is so so easy, You see everyone else around you making money hand over fist for doing nothing. You see Bitcoin Billionaires on Instagram and think if I don't get in now then that will never be me.

When lambo?

Rule #1 Don't Buy on Fresh Highs

I'm sure you have heard the axiom "buy low, sell high." When you are buying at fresh highs, you aren't buy low - you are buying high and hoping to sell higher.

Let's take an example, it is mid-June and Ethereum has been going up each day and each you keep thinking you are missing out and had you bought yesterday how much you would be up today. This is it! Ethereum is going to the :new_moon_with_face:

ETHUSD

Of course, you should wait. And let's looked at what happened.

ETHUSD

You would have had to wait 79 days, just to break even! 79 days! I wouldn't want to be caught holding those ETH.

If you want, go check the history of some other coins. Look for when it reached fresh highs and look what it did almost immediately afterwards. Go ahead, I'll wait. And Some of them (looking at you, Ripple) still haven't fully recovered. Do you want to be the one left HODL'ng in the red, waiting for the price to come back up?

And they don't make memes for nothing

FUD

Fear, uncertainty and doubt. Protect what you have. It is a flight or fight response and since you can't (or probably should try) fighting the market, you flight.

My coins are down today. This could be the bubble everyone is taking about. SELL! SELL! SELLLLLLLLLLL!

PANIC SELL ALL THE COINS

Rule #2 Don't Sell on Fresh Lows

What I mean by that is, if you just bought a coin and it is down 3%-4% the next day - don't sell. There will be ups and there will be downs. The crypto market is highly volatile and if you have been HODL'ng for anytime, I'm sure you can see that a short-term dip usually is just a matter of days before you are breaking even or even up.

If you panic sell at every small dip in the market then I gaurantee all you are doing is throwing good money after good money after fees.

And for my second confession, I too have panic sold. It is OK, we can hug later. But it does feel good to get it off my chest. Phew, what a relief

Let's take another example with Ethereum, lets say you bought at ETH for $225 on July 21st, It had a good run up, you aren't buying at fresh highs and you believe strongly in Ethereum. It has been 6 days since you bought and the price closed at $202 - down 1%.
Should you

a) HODL or

b) SELL?

Feel free to check the answer

Now, I do hear you saying, but there is a huge risk in HODL'ng (again I'm looking at you Ripple). And sometimes you do have to cut your losses and realise that you have made a bad call. I am advocating using STOP-LOSSES which I'll cover in another post but for now, I'm taking just about panic selling.

Recognize the FOMO or FUD

FOMO and FUD are natural. We all get it from time to time. What will separate the investors that make money and those that lose money trying to chase, is recognizing when you are trading based on FOMO or FUD.

I almost did it myself yesterday. I wanted to get in a position and had my price set. While, I was busy with other stuff, the price had climbed 2%. I ran to the computer and almost placed a buy order at the market value, which was now at 3%. But I caught myself, I was having a FOMO moment. I put my buy order in at my original set price and walked away. If I didn't get it then there would be other opportunities. And you know what - a few hours later, my order filled.

You have to take the emotion out of it. The market doesn't care. It can be a very cruel and insensitve place.

Don't be mislead by headlines

Headlines drive the FOMO and FUD above - just at a more macro level. Jamie Dimon says it is a bubble, China is banning ICOs, McAfee says bitcoin is goind to be worth $500,000USD in 3 years. So what? None of these people have any more of a crystal ball into the future than you do. Trust your judgements, stick with your convictions and if you truely believe in the long run, then ignore it.

Think to yourself - at least now I know what the marjority of everyone will be doing, I'm going to follow the smart money and do the opposite. 9 times out of 10, it will pay off.

And same goes for trading groups, telegram, troll boxes.

Ask yourself fundamental questions

Is bitcoin really worth $6,000USD? Does this price justify its value? If you don't feel it does then don't buy it at that price - no one is forcing you.

Or what about this new coin my friend is telling me about that will be 10x, 100x in a few months. What is the problem it is solving? Who is the team behind it? What is the technology like? What is the comminuty like? Adoption? What is on their roadmap? How have they preformed against this roadmap? Do they even have a roadmap? etc etc etc

If you have done your research you should be able to answer a few of these fundamental questions. And trust me, if you take the time to do your own research you will be ahead of 90% of the other people just jumping on the latest coin because they saw it was up double digit percentage points the day before.

Having done your research you will not only be ahead of the game but the little ups and downs each day along the way aren't going to matter that much.

Ask yourself if you can get this coin for cheaper?

This is such a simple question yet I never hear anyone asking it.

What if I told you, you could have a coke today for $1.00USD or a coke tomorrow for $0.85USD? Would you wait?

What if I told you that you could sell that coke in 7 days time for $1.50USD? Would that change anything?

What about if you could do this with 100,000 cokes?

You don't to be a chart wiz to take a few minutes before placing your buy order to see if the coin is at an all time high. If it - stay away! I repeat DO NOT BUY!

TLDR;

We have all been guilty of FOMO or FUD at some point with cryptocurrencies. Acknowledge the emotion and trade rationally, and remember:

- [x] Rule #1: Don't buy at fresh highs
- [x] Rule #2: Don't sell at fresh lows

Thanks for reading through my first of hopefully many posts. If you liked it and would like to see more, please give it thumbs up below so that I know. Or comment below with what tools you use to over come the FOMO or FUD. I would love to hear about.

Thanks and until next time.