FOMO might be your portfolio’s worst enemy

Disclosure: The views and opinions expressed here are solely those of the author and do not necessarily represent the views and opinions of crypto.news editorial.

Fear of missing out, or FOMO, manifests itself in a variety of ways. For some, this encourages them to purchase Taylor Swift concert tickets worth over $32,000 so they don’t miss out on an unforgettable experience or the chance to be part of a cultural event. This sense of urgency can lead people to make impulsive decisions due to the concern of not being able to participate in the excitement and exaggeration of an event.

In today’s digital age, where social media powers real-time updates and curated highlights, FOMO has become even more pronounced. This fear can lead individuals to exaggerated trends that do not align with their own interests.

The emotional ups and downs of crypto’s volatile market intensify this effect. Investors may buy rising assets to ride the wave of success during a bull run, but panic and sell at a loss when prices fall for fear of further declines.

The enthusiasm-fear cycle is especially evident in the digital asset market, where social media, influencers, and constant news updates can make investors feel like they’re missing out on once-in-a-lifetime opportunities if they don’t act. fast.

This behavior caused by FOMO creates an artificial sense of urgency, leading people to invest without analyzing and understanding what they are investing in.

Let’s go back to 2021, when non-fungible tokens gained immense popularity and some digital artworks were sold for millions of dollars. The explosive demand for NFTs has been driven primarily by investors’ desire to act on what appears to be a get-rich-quick scheme. Even celebrities and brands entered the NFT market, increasing the excitement. But as expected, this madness eventually came to an end.

The political climate also significantly magnifies FOMO. When prominent political leaders make statements supporting or expressing interest in emerging technologies such as crypto, excitement can spread throughout the market.

Donald Trump is a prime example of this because his adoption of crypto has helped increase the legitimacy of digital assets in the eyes of the public. Its success in the 2024 United States presidential election allowed the price of Bitcoin (BTC) to rise to $90,000 for the first time.

While this is undeniably great for the crypto market, it raises important questions: Are investors trading based on genuine interest or simply looking to ride the wave of political momentum and excitement?

In this age of hype-driven market speculation, automating investing can offer a much-needed solution by bringing 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 essential for a market as unpredictable as crypto.

By relying on algorithms to execute trades, investors can avoid impulsive decisions that often result from market enthusiasm. This removes the emotional burden that FOMO typically brings and ensures trades and investments are made according to rational, data-driven strategies.

Automation can also help manage risks, a critical aspect of investing in a market prone to severe volatility. Through algorithms, investors can set clear risk parameters and ensure that they do not overexpose themselves to a single asset or sector.

3Commas, for example, offers solutions to help asset and fund managers, family offices, and licensed financial advisors manage the complexities of crypto trading by automating strategies. The platform offers digital asset portfolio management features, making it easier for investors to implement strategies without constant manual intervention. 3Commas serves individual investors and large institutions, providing the infrastructure necessary to automate trades and adhere to a disciplined strategy without adding unnecessary technical hurdles.

Codeless automation tools like 3Commas offer crypto investors 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, by making data-driven decisions, investors can minimize emotional biases that often lead to impulsive actions in volatile markets.

While an emotional compass can help navigate many aspects of life, investing based on factors other than facts can 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 driven by unpredictable emotional impulses.