FOMO and FUD, the buzzwords of the tough investors

If you have spent at least one day in your life looking into cryptocurrencies, most likely you came across one of these two acronyms, or maybe both: FOMO and FUD. They describe two of the most powerful behaviour of investors (especially amateur cryptocurrency investors) that considered to be the prevailing cause of losses in the crypto-sphere. The first one is FOMO: Fear Of Missing Out. Imagine that you just went to buy a new sofa for your house. Imagine that your friend comes to visit you that evening and tells you that the same exact sofa was for sale in another store at half the price that you just paid.
Now imagine the other way around.
You were considering the idea of opening a bakery.
Your friend just opened a bakery and he is making a fortune out of it.
Third example. While you parked your savings in a fix deposit investment that returns 3 per cent a year, your friend placed his chances in a cryptocurrency that returns 3 per cent a day.
How would you feel? Of course disappointed.
Some might feel a little angry too.
The Fear Of Missing Out is a natural instinct. There is nothing wrong with a little bit of FOMO when “playing” with cryptocurrencies.
But when FOMO is the only guideline, schizophrenia kicks in.
Some amateur investors would subtracts funds from the wallet of a cryptocurrency that is losing to acquire coins that are growing in price.
So, mobile apps like Crypto Market Cap, which marks in red the losing cryptos and in green the gaining cryptos, has a setting to enable or disable “No Panic Mode”. Basically all price fluctuations lose the colour code, so that potentially the investors will not feel so bad when all the numbers in his list are red.
As much as FOMO is not an ideal behaviour when investing, even the opposite of FOMO might not be the best strategy.
There is not an actual acronym for it, but if you have caught yourself selling “the green ones” to acquire more “red ones” without a proper investment knowledge foundation, then probably a bit of FOMO in your blood would not hurt.
Some investor that were holding solid currencies such as BitCoin and Ethereum, exchanged their coins for others, less known, which for a day or two grew dramatically, then on day 5 lost 80 per cent of their value.
So instead of sticking to solid cryptocurrencies, because of their Fear Of Missing Out, moved into a “Pump and Dump” trap that resulted in losing significant part of their crypto portfolio.
The second one is FUD: Fear, Uncertainty and Doubt.
Imagine that you just purchased a new car. You drive it back home full of pride for what you think is the best car you ever purchased.
Once home, you read the news that the car manufacturer has recalled that specific model of the vehicle due to some safety hazards.
Now imagine that you wanted to invest into a commercial property that was going to be constructed within 1 year.
Upon inspection, the agent told you that a new road and a new mall would have been built just next to your commercial property, hence increasing the value of it.
After paying the deposit however, a friend tells you that the information was incorrect, and that very road and that very mall, were to be constructed some miles away.
Lastly, pretend that you want to purchase a new cellphone and you are deciding between two different models.
However in one store they tell you that the former is better and in the next store they tell you that latter is better.
In all these 3 cases the prevailing feeling is to take a decision based on hearsay. In some cases paralyses investors, while in other cases makes investors take reckless decisions.
In the case of IOTA for example, when some e-mails emerged revealing that claimed partnership with Cisco and Microsoft were not actually true, FUD kicked in.
The investors who sold, ceased to look at the main aspects of the currency — which just a few weeks earlier bought thinking that would have changed the world — and let Fear, Uncertainty and Doubt prevail.
In some cases, for the most emotional investors, FOMO kicks in first, followed by FUD.
So when I hear someone saying that “they lost money in cryptocurrencies”, I wonder how is it possible to lose money investing in Ethereum for example, which grew more than 11,000 per cent in 1 year? The only possible explanations are FOMO and FUD.

Stefano Virgilli
stefano@virgilli.com