Things We Should Know About FOMO And FUD In The Crypto Market

in LeoFinance8 months ago (edited)

For those of us familiar with the crypto market, it is very common to know what FOMO and FUD are. But for those who aren't and don't know these terms, I'll define it as simply as possible.

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FOMO is that feeling that people have in the markets when they think they are about to miss out on a great profit opportunity. And FUD is exactly the opposite, that is, it is the belief that a crypto asset is going to drop in price and/or disappear from the crypto market.

FOMO and FUD are two burdens that lead to financial disaster for investors who fall in them

The terms could be explained in a longer way, but not simpler than what I just explained. And logically, both FOMO and FUD have the particularity of awakening two bad passions in investors, which are greed and fear respectively.

Both feelings lead to making mistakes in the markets, which leads to money losses that could be avoided with a little study and emotional self-control. Because in the face of FOMO, people invest on impulse, because they believe they are going to miss out on a great profit opportunity. FOMO, not surprisingly, occurs during big market impulses. In those moments when it seems like the price of a cryptocurrency just goes up and up. It is in those moments where the greed of the reckless who fall into FOMO is unleashed.

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So they buy a crypto asset at an inappropriate time, just when the bullish situation is about to turn around and become strongly bearish. This leads to huge losses. I clarify that I am speaking here in terms of investments (and more specifically speaking of crypto investments).

And FUD, for its part, happens when investors believe that the price of an asset is going to fall and generate monetary losses. Or worse, when they believe that the price of a crypto asset may fall so much that it may completely disappear from the market. They then make decisions to abandon their positions early in the markets. They sell at a loss so as not to risk losing more money, but it turns out that in many cases after they sell and give up their positions, the price of the asset or cryptocurrency begins to rise.

What can we deduce from all this? That what causes financial disaster for investors is not FUD or FOMO per se, but the wrong decisions that investors make when they get carried away by them in the markets. And that FOMO and FUD never have a real basis, but are just impressions that arise based on what is believed to be happening in the market, and not based on facts.

This is (saving distances) like religion and sins. Sins are committed by people when they allow themselves to be guided by base impulses such as envy, jealousy, hatred, gluttony and all other capital sins. So in investing, FOMO and FUD are the two deadly sins, because they lead to all the sins that make investors lose money in the market.

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The solution to FOMO and FUD

Emotional self-control and study are critical factors to get rid of both FOMO and FUD. Because the competent study of the market through serious analysis (fundamental and technical analysis) of cryptoassets will allow us to achieve adequate emotional self-control.

In this sense, learning to do these analyzes requires study and dedication, reading specialized literature and many hours of practice in trading and investment simulators (such as, for example). So, you have to know this very well, because whoever becomes a good investor in the markets is not by chance, but by a lot of study and many hours of trial and error in the markets. This is like the case of flight pilots, in the sense that to be an airplane pilot you need many hours of study, practice and training in flight simulators. And then, many hours of flight will determine your level of competence in such a sense.

Now, all this is worth it to be able to act properly in the markets. Because losing your nerve because of every crazy person who appears on YouTube or X to say that a cryptocurrency is going to the Moon or to hell is impractical. Let us remember that we are in the age of information, but unfortunately, also of misinformation, so in addition to true news, there is also fake news. And most people do not know how to differentiate reliable sources of information from those that are not.

Furthermore, it is not healthy to invest in the markets just because someone says or fails to say something about a crypto asset. Since in the end, the only person responsible for your money when investing is you and only you. So you can never blame your losses on anyone in the market. Therefore, so much emphasis must be placed on this part.

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What we need to know about FUD and FOMO

What we as investors must know very well in the crypto market is that no one, but absolutely no one, knows exactly when the price of a cryptocurrency is going to rise or fall, or by how much. And no one knows when exactly the crypto market (which is the global compendium of all cryptocurrencies that exist) is going to start a bullish or bearish run.

It's as simple as that. And whoever say the opposite, lies. Because markets are complex and the crypto market is even more so. We have to understand that except for stablecoins (such as USDT, USDC and others) it is extremely volatile. But taking into account the volatility factor it is possible to make profits in the crypto market.

It's all a matter of knowing how to play our cards very well (to put it simply). What I mean by this is that we can choose any Stablecoin and use it to invest in any cryptocurrency that interests us at any given time (after study, of course). And then, when we make our profit (or cut losses, because it can also happen), we must sell in exchange for the same stablecoin with which we bought, this will help us be clearer in what we are doing. Because many times people make trades in the crypto markets using any cryptocurrency pair and then they fail because they don't even understand the relationship of the respective pair, nor what exactly they are doing.

So, I repeat, the easiest way to solve this is that when we invest in a cryptocurrency that interests us, we use a cryptocurrency whose value is fixed or stable (a stablecoin). This will help us effectively understand the value of our investment, and therefore, if we are really losing or gaining with each operation.

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Now, all of this that I just mentioned is important to take into account. But also knowing something that some people often confuse in the market. That something is that trading is one thing and investment is quite another. Although both terms could also be explained at length, in a concise manner, what must be understood in this regard is that trading is when we buy something with the intention of obtaining liquid profits in the short term. While in investments we hope to obtain a liquidity return in the medium and long term.

This is important to highlight, because part of the reason why so many people fall into FOMO and FUD is precisely that, that they do not know if they are really investing or trading. Because if you don't know what you are doing in this regard, you will make mistakes that will lead to inevitable financial losses.

Because when someone is making an investment, they cannot be startled by every contrary movement that the market makes. Since the investor seeks a substantial profit, but in a longer period of time than the trader. The trader, on the other hand, does have to be more attentive to what happens in the period of time in which he operates (daily, intraday, etc.), because it seeks profits in the short term.

So the trader cannot wait as long as the investor to react because its objective is to obtain constant liquidity for shorter periods of time than the investor. Therefore, when someone is supposed to be investing in a cryptocurrency, it should not get nervous or act on every impulse or drop in the market in short periods of time, because that would demonstrate three things: 1. Lack of emotional control. 2. That it is someone who falls into FOMO and FUD, and 3. That it has no idea what it is doing in the markets.

In my opinion, these are, broadly speaking, the most important things we should all understand about FUD and FOMO when we are investing or trading in the crypto market (or any type of asset).

What do you think about the topic discussed? Please comment.

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