FOMO Could Be Your Portfolio's Worst Enemy

The fear of missing out, or FOMO, manifests itself in several ways. For some, it encourages buys Taylor Swift concert tickets for more than $32,000 so you don't miss out on an unforgettable experience or the opportunity to be part of a cultural event. This sense of urgency can lead people to make impulsive decisions driven by anxiety about not being included in the excitement and hype surrounding an event.

In today's digital age, where social media amplifies real-time updates and curated highlights, FOMO has become even more pronounced. This fear can draw people toward exaggerated tendencies that may not align with their best interests.

In the case of cryptocurrencies, the emotional roller coaster of its volatile market intensifies this effect. Traders may buy rising assets during a bull run, chasing the wave of success, only to panic and sell at a loss when the price falls, driven by fear of further decline.

The euphoria-to-fear cycle is particularly prominent in the digital asset market, where social media, influencers and constant news updates can make investors feel like they are missing out on once-in-a-lifetime opportunities if they don't act. fast.

This FOMO-induced behavior creates an artificial sense of urgency, leading people to invest without analyzing or understanding what they are investing in.

Let's go back to 2021, when non-fungible tokens <a target="_blank" href="https://www.cnbc.com/2022/03/10/trading-in-nfts-spiked-21000percent-to-top-17-billion-in-2021-report.html” target=”_blank” rel=”nofollow”>cattle massive popularity, and some digital artworks sell for millions of dollars. The explosive demand for nfts was primarily driven by investors' desire to act on what appeared to be a get-rich-quick scheme. Celebrities and brands even <a target="_blank" href="https://www.washingtonpost.com/arts-entertainment/2022/02/04/celebrities-cryptocurrency-nfts/” target=”_blank” rel=”nofollow”>entered the nft market, adding fire to the hype. However, as expected, the madness eventually died down.

The political climate also significantly magnifies FOMO. When prominent political leaders <a target="_blank" href="https://www.cnn.com/2024/11/17/politics/crypto-industry-donald-trump-reelection/index.html” target=”_blank” rel=”nofollow”>do statements endorsing or expressing interest in emerging technologies such as cryptocurrencies, enthusiasm can spread throughout the market.

Donald Trump is a prime example of this, as his adoption of cryptocurrencies has helped raise the legitimacy of digital assets in the eyes of the public. Its success in the 2024 US presidential election has driven the price of bitcoin (btc) to rise to $90,000 for the first time.

While this is undeniably great for the cryptocurrency market, it raises crucial questions: Are investors operating based on genuine interest or simply looking to ride the wave of political momentum and hype?

In this era of hype-driven market speculation, investment automation could offer a much-needed solution by introducing a layer of discipline and objectivity to the market. Automated trading systems are designed to follow predefined rules based on data rather than emotions, which is necessary for a market as unpredictable as cryptocurrency.

By relying on algorithms to execute trades, investors can avoid the impulsive decisions that often arise from market euphoria. This removes the emotional baggage that FOMO often brings, ensuring that trading and investing is done with rational, data-driven strategies.

Automation can also help manage risk, a critical aspect of investing in a market prone to drastic changes. Through algorithms, investors can set clear risk parameters, ensuring they do not become overexposed to a single asset or sector.

3Commas, for example, offers solutions to help asset and fund managers, family offices, and licensed financial advisors navigate the complexities of cryptocurrency trading through strategy automation. The platform provides digital asset portfolio management features, making it easy for traders to execute strategies without constant manual intervention. Serving individual traders and major institutions, 3Commas offers the infrastructure necessary to automate trading and follow a disciplined strategy without adding unnecessary technical hurdles.

No-code automation tools like 3Commas offer cryptocurrency traders a more systematic approach to managing their portfolios, reducing the impact of FOMO and allowing users to focus on long-term goals. As a result, traders can make data-driven decisions, minimizing emotional biases that often lead to impulsive actions in volatile markets.

While an emotional compass can help guide many aspects of life, investing based on factors other than facts could lead investors in the wrong direction. There is no room for FOMO when it comes to trading, as successful investment strategies are based on data and a disciplined approach rather than being carried away by unpredictable emotional impulses.