There are a lot of terms/phrases in crypto that are very specific and aren’t present in other aspects of life or other types of trading. 

 

Understanding those terms is extremely important, mainly because they can help you in your investing, and following certain trends that can benefit you. Becoming familiar with the terminology in cryptocurrency trading is essential if you want to really understand the whole crypto world and grasp the possible investing opportunity.

 

Of course, as with everything, there are certain terms that a regular trader doesn’t really need. Those terms are mostly used in more advanced trading strategies that are often utilized by professional traders. They are complex for a regular Joe to understand (not that he/she couldn’t, it’s just that they don’t need to).

 

For a beginner trader, who is just getting into the crypto game, the list is way smaller. But don’t get fooled by this. Even though crypto terminology mostly isn’t complex, certain aspects can be hard for you to understand - and you’ll need to do a few trades yourself to understand them to the fullest.

 

On top of the list of important crypto terminology would surely be FOMO, a term that is widely used by many traders. In fact, it’s the one term you will probably first come across when you start your crypto journey, together with “to the moon” that is another term crypto traders just adore. 

 

Therefore, this article will be all about FOMO and what it is. We’ll explain what the acronym stands for, why it is important in the crypto world (and trading in general), why many people fall into the “FOMO” trap, and how you can use FOMO to be a better crypto investor.

What is FOMO?

Let’s start with the explanation right away. What is the meaning of FOMO? FOMO (Fear Of Missing Out) is a term that is used to describe a feeling that one gets when they are not in the know of something, or when they are missing out on information.

 

This information can be virtually anything (and hence, this is why FOMO is a term that can be used in other aspects of life, not just crypto), such as events, experiences, and certain decisions that in most cases one could benefit from.

 

The term has become increasingly popular in the last couple of years mostly because of crypto trading and advancements in technology. In fact, Flori Marquez, co-founder of Blockfisays that FOMO will be the main investment driver for crypto in 2022

 

This puts FOMO on the pedestal when it comes to important crypto terms you should be aware of, as it can easily influence the movement of price for certain cryptocurrencies. 

 

But let’s explain what FOMO means in more detail. And is there a better way to do that, than giving you an example? Let’s say that a famous band is coming to your town. You don’t exactly listen to that kind of music, and when it comes to deciding whether you should go, it’s a 50:50. But, all your friends are going - and this is the key factor when making a decision.

 

Because your friends are going, the odds change, and the FOMO effect takes its toll. You don’t want to miss out, and you don’t want to miss the good times with your friends at the concert. You think that they will have a lot of fun (which may, or may not be true), and even though you didn’t want to go in the first place, you now want to go, in order not to miss out on that fun.

 

This is a perfect real-life example of FOMO, and how the effect can influence your decisions. It’s obvious that FOMO could be applied anywhere - real life, crypto, you name it. You make FOMO decisions daily, you just aren’t aware of it - and this is exactly why FOMO is so important to understand.

 

If you want to learn more about the importance of FOMO in your daily life, we suggest that you have a look at this TEDx talk from Bobby Mook as he describes the concept in a good way.

 

 

But let’s focus more on the topic of this article - FOMO in crypto. Hopefully, now you understand what FOMO is, but let’s see how it influences crypto and why recognizing this effect can help you make better investment decisions.

Examples of FOMO in crypto

We mentioned that 2022 will be a year fueled with FOMO in crypto. But who says that 2021 wasn’t just thatMany experts say that 2021 was a year powered by FOMO and that thanks to it, many coins fluctuated in price without any proper reason.

 

FOMO in crypto is always present. And this isn’t only applicable to small coins. Take Bitcoin for example - the FOMO influences its value rise as much as for any other cryptocurrency out there. And yet again, let’s explain this through an example, it will be easier for you to grasp.

 

Many people think that Bitcoin is powerfully connected to all other smaller cap coins, called altcoins (alternative coins). And they are probably right - altcoins usually follow Bitcoin in terms of price movement. When the price of Bitcoin goes up, altcoins follow (although not always). When it goes down, altcoins go down as well.

 

The reason behind this (amongst many other things is) is FOMO. Let’s say that you are an investor that owns altcoins. You are comfortable in your investment but suddenly, for some reason, you see that the Bitcoin value increases out of nowhere fast. You know that Bitcoin is a big daddy when it comes to crypto and what do you do? You sell your alts and move your investment to Bitcoin before it grows in value even more.

 

This is a textbook example of FOMO. Essentially, you’re afraid to miss out on opportunities. You see that the value of Bitcoin is increasing and you are afraid that it will increase even more and that you will miss the train. Millions of other people think like you, and the global FOMO effect takes place.

 

Everyone is selling their altcoins (and the price of those tokens go down), and buying Bitcoin since it’s increasing in value (and therefore, they are unconsciously increasing the price of it themselves). A wonderful example of FOMO.

 

FOMO applies to other cryptocurrencies as well, not just Bitcoin. Another perfect example of FOMO in crypto is the example of DOGE, a meme cryptocurrency, that rapidly gained in value.

 

People didn’t want to miss on it and bought it - which resulted in pumping the DOGE’s value even more. Experts even pointed out that it’s a meme coin with essentially no real value, and that the FOMO is taking place, but no one seemed to care. The value grew and grew, and eventually, the bubble burst, which almost always happens when FOMO takes place.

 

Therefore, it’s important to recognize when FOMO is taking its toll and when the crypto is pumping only because of it. In those situations, it’s important to recognize it to make a good investment decision, and not act solely based on FOMO. Let’s cover this in more depth. 

How to use FOMO to make good investment decisions?

FOMO is an effect you can use to your advantage, to make a good investment decision. Everyone who says differently is in the wrong. Many newbie crypto traders fall into the trap of FOMO when they first start trading. The same thing happened to me - I saw that a specific coin was pumping and I dived head first and threw a couple of hundred dollars at it. Of course, it was the peak and the coin lost 50% of value in a matter of days.

 

Recognizing FOMO can help you not jump on the hype train if that train is about to stop. It’s important to say that you can’t know when it will stop, and DOGE is a perfect example of it. 

 

When it started pumping at the beginning of 2021, everyone thought that it’s a pump and dump and that it wouldn't last long. People waited one day to invest in it saying that they won’t fall into the FOMO trap. But DOGE continued to grow in value. Then they waited another day and another day…

 

With each day passing, the coin grew in value and even though everyone expected that it would burst like a bubble, it took a good 10 days for it to happen. DOGE can thank Elon Musk for this, especially his tweeting.

 

The point here is that FOMO doesn’t always mean that the coin will drop in value in a matter of a few days. Sometimes the FOMO effect can last longer as we saw with DOGE.

 

But, if you see that community is pumping a certain coin without a good reason to do so (no new news about the project, new partnerships, etc.), then the FOMO effect is likely taking place and you should expect that the price of the coin will drop in a short time frame. 

 

You have two options in this case - first, if you know to recognize FOMO and do it early enough, then you can invest and expect that your investment grows in value in a few days. When the FOMO effect subsides, that’s when you need to exit and collect your earnings.

 

The other case is when you recognize the FOMO effect, but you are late to the party. The best thing to do then is to wait for the pump to end and buy the coins if you want to when the bubble bursts - the coin will be on a discount.

 

All in all, in both cases, understanding FOMO and recognizing it before others can be very beneficial for you. After all, FOMO is present in crypto every single day and you should seize the opportunity if you can.

Knowledge is the key

When I started as a crypto trader, I wish that someone told me about the crypto terminology and FOMO above all else. If I had known that, I would have not become grey this early in life. 

 

Becoming knowledgeable in crypto trading and understanding the terminology is the key if you want to become a successful trader. It might not seem like a big deal, and you might think that learning certain strategies is more important, but trust me when I say that the crypto world works in a weird way, and that it’s essential that you become “friendly” with expressions and terms used.

 

 

In the end, profit is all that matters. And understanding FOMO is a good way to secure some of it.