FOMO is an acronym for “Fear Of Missing Out”.
It’s an overwhelming emotion of anxiety felt by crypto investors and traders when they expect a digital asset’s value to increase.
They haven’t bought any yet, but they don’t want to miss the lower price right now, so they jump into the trade simply based on that expectation.
Investors feel like they’re going to miss buying into the next big “narrative” that everybody is talking about, or the next big move up is right around the corner and they fear missing out on those easy gains.
This emotion builds more and more as they see price increases, while they’re still on the sidelines, not owning any.
“FOMOing” into a crypto trade, or simply buying or selling an asset based purely on emotion, without taking anything else into account when making that decision, has a high likelihood of resulting in the investor losing money.
This could happen because the trader is finally buying in as momentum is losing steam, or because she’s held too long and other traders are now selling to lock in profits.
Let’s take an example from Crypto Twitter.
Trader 1: “Elon Musk was pumping up Dogecoin on Twitter this morning. That thing jumped 25% in the first hour! I knew it was still gonna go higher, so I FOMOed in and bought $500 worth. 30 minutes later, a whale dumped his position and price dropped like a rock. I got rekt!”