FOMO: Its Effects on Cryptocurrencies and Crypto Traders
Cryptocurrency markets are quickly gaining momentum in Africa and shores beyond. Regardless, its adoption has been opposed across various national economic schemes as a result of frequent price fluctuations, courtesy of its volatility. In recent months, the price of Bitcoin has very well been a bit of a concern to traders. A question to ask in this regard becomes, what exactly informs the frequent price fluctuations in the crypto space?
Well, there are several factors that affect the price of cryptocurrencies which may hinge on issues such as regulations, cost of production, adoption by masses, utility, and FOMO amongst others.
Fear of missing out, otherwise known as FOMO can be described as a pervasive apprehension that creates the impression that others might be having rewarding experiences from which one is absent. You may be wondering what this has to do with cryptocurrencies. Well, the connection is that FOMO can cause people to act impulsively. If you are afraid of missing out on an opportunity, there are chances that you will be more likely to make risky decisions because the fear of missing out overrides your judgment. This has serious implications in crypto markets, especially when it comes to pumps and dumps.
Some ways in which FOMO is capable of affecting crypto traders and cryptocurrencies likewise, include:
- Price fluctuations owing to impulsive trade: FOMO can be problematic in crypto markets because it causes people to make impulsive decisions based on the fear of missing out, which leads to volatility as people tend to buy quickly and sell quickly. During the late-night hours, this is especially true considering that there are fewer people watching the markets thereby signifying a time when FOMO can run rampant.
- Wider adoption: Since people are afraid they will miss out on great opportunities, this leads them to look for ways to enter the market through exchanges or other means. The recently launched Afridex exchange at afridex.io can be used as a case in point.
- Discouragement of newbies: First-time traders may likely be discouraged to think that the whales are manipulating the prices of crypto in their own favor. As a result, newbies without proper research may fall victim to FOMO leading to unbearable losses.
- Increased emphasis on other trading factors to consider: As a trader, you will need to pay attention to other market signals as well before making a decision. FOMO should never be your only reason for making a trade. Crypto markets are largely unregulated and carry great risk, so it is important to educate yourself and take all factors into consideration before trading.
The fourth point as seen above also serves as a caution to traders within the crypto space as impulsive trading can lead to massive losses.
In conclusion, although it might be difficult to avoid FOMO and panic selling, it is possible to manage these emotions so they do not dictate how you trade.
As such, developing and sticking to a trading plan that works for you is the best method, plain and simple. A trading plan should outline the kind of conditions that make a setup tradeable as well as your objectives and the risk that you are willing to take on each trade.
Kickstarting or continuing your trading journey as a crypto trader is sure to be hitch-free with the about trading tips.
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