FOMO, or Fear of Missing Out, is a psychological phenomenon in trading and investing where individuals feel compelled to join a popular trend due to the fear of missing potential profits.
In crypto markets, FOMO often arises when traders observe rapid price gains in assets which was seen in late 2021 and early 2024, especially in speculative spaces like memecoins. Fueled by the desire to capitalize on short-term gains or due to fear of missing a perceived “golden” opportunity, FOMO can lead investors to buy assets impulsively, often at inflated prices.
The Mechanics of FOMO in Crypto Markets
Crypto markets are highly susceptible to FOMO, amplified by social media, where influencers, hype campaigns, and viral trends can influence large numbers of users. This dynamic creates price movements that may seem promising on the surface but often lack long-term value or utility. FOMO can drive prices up quickly, creating a speculative bubble that might soon collapse, leaving many latecomers with significant losses.
Triggers of FOMO:
- Social Media Hype: Platforms like Twitter, Reddit, and YouTube are common spaces for crypto discussions, where influencers or communities can promote projects, sparking interest.
- Market Pumps: Rapid price increases in projects with little fundamental value can attract speculative attention, leading to a domino effect as more buyers join the trend.
- Celebrity Endorsements: In some cases, celebrities or public figures endorse projects like World Liberty Financial by Donald Trump, which can trigger widespread FOMO, drawing in audiences outside the crypto-native crowd.
How Experts Use FOMO to Short at Higher Levels
Experienced traders like me use FOMO-driven cryptocurrencies to make shorts and profit from this misplaced euphoria. To make sure we do not incur losses, we place a stop-loss at 5% of our drawdown.
Steps Experts Take:
- Monitor Social Media Activity: Experts analyze trending coins on social platforms and monitor mentions, discussions, and sudden spikes in popularity. Analyzing social metrics helps them gauge when FOMO is influencing buying decisions, often pushing prices to unsustainable highs.
- Assess On-Chain Activity: To distinguish hype-driven price pumps from genuine growth, experts examine blockchain data, looking for metrics like increased active addresses, transaction volumes, and protocol development activity. When price action is unsupported by on-chain fundamentals, this discrepancy signals a potential short opportunity.
- Timing Short Positions: By entering short positions during peak hype, experts aim to capitalize on eventual price corrections as FOMO fades. This strategy is especially effective in memecoins and highly speculative projects, where initial excitement can quickly dissipate, leading to sharp sell-offs.
- Managing Risk: FOMO-driven trends can be unpredictable, so experts often set tight stop-losses and watch market sentiment closely to adapt if trends gain more traction than anticipated.
Don’t Get Carried Away
Events like market highs tend to make users euphoric and I have seen many such users get trapped in higher levels. Therefore, it is always wise to let the markets cool down by at least 20% before investing despite all-time highs.
Even institutional asset managers such as El Salvadore’s government got caught in such a bull-trap and bought crypto at $47k in March 2022. They got trapped and had to wait for another two years to break even.
Popular Crypto Slangs
Altcoin
Altcoin is any alternative cryptocurrency except Bitcoin. However, despite being altcoins, stablecoins are not generally referred to as altcoins.
All-Time High
All-Time High is a term that is used to denote the highest price crypto has ever achieved. It is used by investors and traders (along with the ATH date) to see the long-term trend in that crypto’s price. Frequent ATHs are preferred more which shows that the price is growing fast.
Bullish
Bullish refers to the market sentiment where a cryptocurrency or the crypto markets are expected to grow higher. The factors that make crypto or the entire market bullish are fundamental developments (Dencun Upgrade in Ethereum), adoption (Bitcoin wallets reaching ATH), announcements (launch of ETFs, features), regulatory breakthroughs (ETF approval), and many others.
Its opposite is the state of being “bearish“.
Bearish
Bearish is a market sentiment that shows pessimism for a specific crypto or the entire market. The factors that can result in bearishness are bad regulatory actions (like ripple vs sec case), lack of adoption (in Cardano), and long periods of selloffs in the markets (line crypto winter).
The opposite of bearish is being “bullish“.
BUIDL
BUIDL is a modified term used for the on-chain development of existing as well as for the launch of new projects. It is believed that those projects that build more tend to attract more users.
DYOR
Do Your Own Research or DYOR is a concept where readers of news media websites, help articles, or viewers of crypto media channels are encouraged to research things on their own so that they can make better-informed decisions and avoid shilling, false promises, scams, and traps.
FOMO
FOMO, or Fear of Missing Out, is a psychological phenomenon in trading and investing where individuals feel compelled to join a popular trend due to the fear of missing potential profits.
FUD
FUD refers to Fear, Uncertainty, and Destruction (or Doubt), that arise in the minds of market participants due to a bad political, economic, or industry problem.
GMI
GMI in crypto stands for Gonna Make It and is used in a similar context as WAGMI but on a personal level.
Example: Suppose a trader has made a major loss but has enough crypto to resume his trading journey. He would say GMI or Gonna Make It.
Example 2: We could use Gonna Make It for Axie Infinity, which lost $625 million in a hack in 2022 but still had enough funds to cover its loss.
HODL
HODL is the acronym for Holding On to Dear Life. It signifies a long-term commitment to crypto investments, whereby one holds it like their dear life and does not sell it, whatever happens.
Mooning
Mooning is the rapid increase in the price of any cryptocurrency. The term originates from the phrase “to the moon” which means that a crypto’s price is expected to go very high in a short time.
NGMI
NGMI, which means Not Gonna (going to) Make It, is a crypto slang that means there is no hope for a given situation.
Example: USTC will never reach $1, NGMI.
Pump and Dump
Pump and Dump is a crypto technique used by Whales and sometimes even project owners where they buy/hoard (i.e., pump) a specific token to create a supply shortage. This shortage then spikes the price which attracts more people. At the peak of this price, the Whale or owner dumps, and the retail investor gets trapped.
Rekt
Rekt is used as the short form of Wrecked which means to get destroyed beyond any recovery. This is used to denote situations where a trader has lost so much money that recovery seems impossible at this stage.
WAGMI
WAGMI is generic crypto slang that means “We All (are) Gonna(going to) Make It.” It is used in bad situations where there is little hope and helps uplift sentiments.
Example: Bitcoin will cross $73.7k, WAGMI.
Whale
Whale are large crypto investors who can influence the market’s behavior due to the quantity of crypto they trade. Though there is no official trading volume to become a whale oftentimes we see Whales as those traders who buy or sell more than $100k worth of crypto in a single transaction.
