UNDERSTANDING HOW FOMO AND FUD WORK IN THE CRYPTO SPACE
When we talk about the crypto market, what comes to mind of many is financial freedom, it comes with alot of excitement and happiness. if you have been active in the crypto space for a while now, theres a very high tendency that you must have encountered thes two words; The FOMO and the FUD, FOMO meaning Fear-of-Missing-out while FUD means Fear, Uncertainty and doubt. These two words have a very great impact on how our experience in the crypto space generally is shaped. Every investor or trader have one time or another experienced or encountered these two words. These psychological phenomena are crucial to understanding the dynamics of the crypto space because it is most times what influences the decisions we make as traders or investors.
When we talk of [FOMO](https://leofinance.io/@leoglossary/leoglossary-fear-of-missing-out-fomo(, it is mostly experienced when investors perceive a potential opportunity, usually in the form of a rapidly rising cryptocurrency price, and worry about missing out on potential gains. FOMO often leads to impulsive and emotionally driven buying decisions. Because the investor or trader would want to invest before the opportunity slides, most times he will not make the necessary research and survey, this could most times lead to losses.
WHAT INFLUENCES FOMO?
There are several factors that play roles in influencing the Fear of missing out, among the many factors the few below are considered mostly responsible.
1. INFLUENCE FROM THE SOCIAL MEDIA.
The social media is one primary factor that influences the Fear of Missing Out, there are several social media platforms where enthusiasts and influencers share their opinions and predictions and these platforms have an enormous influence on the trading decisions of many traders and investors. A prediction could just go viral and many investors because of the popularity of the post would rush into trading or investing before they even carry out proper analysis of the opportunity.
2. A SURGE IN PRICE.
For few days now the price of Bitcoin has been on high, because of this surge in price, so many investors and traders rush to invest or trade it.Many times with luck, there's a tendency that some of these investors could make profit but also there's a probability that a larger number will make mistakes, since they rushed into trading with the fear of missing out of the opportunity if they were to take time to make proper analysis.
3. Scarcity Mindset.
This happens when the investors feel like a particular cryptocurrency is not in abundance, so they would would to quickly invest in it with the hope of selling it at a high price in future. If proper analysis is not carried before engaging in the trade, the investors will encounter loss.
WHAT ARE THE POSITIVE EFFECTS OF FOMO
1 On the brighter side, FOMO has the ability to cause the growth of a particular crypto market because of the high demand which will in turn lead to an increase in the price and liquidity too.
2 The fear of missing out has the ability to attract new investors and traders to a particular coin, this will play a role in expanding the user base and also provide a form of networking for that cryptocurrency.
WHAT ARE THE NEGATIVE EFFECTS OF FOMO
1 Investments and trading activities that are influenced by the Fear of Missing Out are often carried out based on emotions and not thorough market analysis, this can cause the investor to make wrong choices which may eventually result in a loss.
2 Because so many persons rush into trade for the FOMO, it could cause a very high surge in price of the cryptocurrency which will eventually fall back down.
LET'S TALK ABOUT FUD
This is actually a strategy that is mostly used in order to spread rumors and negative information as regards to a particular cryptocurrency or even the crypto market as a whole. What FUD hopes to achieve is to cause people to be afraid and thereby give rise to panic among the investors which will cause them to carryout wrong trading decisions.
WHAT CAUSES FUD?
Just like FOMO there are various factors that are responsible for inducing Fear, Uncertainty and doubt in the investors.
1 When a cryptocurrency does not support the interest of a particular group of persons they tend to sometimes spread negative rumors about that cryptocurrency.
2 We could also say that due to the lack of proper regulations of information in the crypto space, anyone could could just get up and begin to spread false rumors to manipulate the market.
3 Because the crypto market is quite unstable there are tendencies of investors believing the rumors when they see that the price is going down.
THE POSITIVE EFFECTS OF FUD
Fear, Uncertainty and Doubt is sometimes not that bad since it will ensure that the investors looks into the coin more, carrying out proper market analysis which could inturn inform smart choices.
THE NEGATIVE EFFECTS OF FUD
1 It has a part to play in the fall and instability of a market since so many persons will be selling their assets due to FUD
2 It can cause a cryptocurrency to loose trust as the FUD eventually damages it's reputation.
THE BALANCE BETWEEN FOMO AND FUD
You may be wondering so how do i balance between the fear of missing out and fear, uncertainty and doubt, well here's your answer,
1 Emotions can be sometimes blinding, therefore to make smart and informed decisions, it is important to carryout adequate market analysis which will help you to know when to enter and exit the market.
2 Risk management is also very important when it comes to investments, the use of stop loss is crucial, also ensure that you have an adequate plan to combat FOMO and FUD also set in place.
3 Do not just focus on the short term gains of the cryptocurrency, it is important that you also take into consideration the long term gain and prospects of the cryptocurrency.
CONCLUSION
If you will survive and thrive in the crypto space, it is essential that you are well kitted with the understanding of both FOMO and FUD, also understand how to manage them. This will help you put your emotions in check and will eventually cause you to make informed decisions.
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