FOMO might be your portfolio’s worst enemy | Opinion

Fear of missing out, or FOMO, manifests in various ways. For some, it prompts them to purchase Taylor Swift concert tickets for over $32,000 to avoid missing an unforgettable experience or the chance to be part of a cultural event. This sense of urgency can lead people to make impulsive decisions driven by the anxiety of not being included in the excitement and hype surrounding an event.

In today’s digital era, where social media amplifies real-time updates and curated highlights, FOMO has become even more pronounced. This fear can lure individuals toward hype-driven trends that may not align with their best interests. 

In crypto, the emotional rollercoaster of its volatile market intensifies this effect. Traders might buy into rising assets during a bull run, chasing the wave of success, only to panic and sell at a loss when price plummets, driven by fear of further decline. 

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

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

Let’s rewind to 2021, when non-fungible tokens gained massive popularity, with some digital artworks selling for millions of dollars. The explosive demand for NFTs was primarily driven by investors’ desire to act on what appeared to be a get-rich-quick scheme. Celebrities and brands even entered the NFT marketplace, adding fire to the hype. However, as expected, the craze eventually died down. 

The political climate also significantly magnifies FOMO. When prominent political leaders make statements that endorse or express interest in emerging technologies like crypto, enthusiasm can spread throughout the market.

Donald Trump is a prime example of this, as his embrace of crypto has helped elevate the legitimacy of digital assets in the eyes of the public. His success in the 2024 United States presidential election has fuelled the price of Bitcoin (BTC) to surge to $90,000 for the first time. 

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

In this era of market speculation driven by hype, automating investing could offer a much-needed solution by introducing 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 necessary for a market as unpredictable as crypto.

By relying on algorithms to execute trades, investors can avoid the impulsive decisions that often arise from market euphoria. This removes the emotional baggage FOMO typically brings, ensuring that trades and investments are made on rational, data-driven strategies. 

Automation can also help manage risks, a critical aspect of investing in a market prone to drastic swings. Through algorithms, investors can set clear risk parameters, ensuring they don’t overexpose themselves to a single asset or sector. 

3Commas, for instance, offers solutions to help asset and fund managers, family offices, and licensed financial advisors navigate the complexities of crypto trading by automating strategies. The platform provides digital asset portfolio management features, making it easier for traders to execute strategies without constant manual intervention. By catering to individual traders and major institutions, 3Commas delivers the necessary infrastructure to automate trades and stick to a disciplined strategy without adding on unnecessary technical hurdles.

No-code automation tools like 3Commas offer crypto traders 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, traders can make data-driven decisions, minimizing emotional biases that often lead to impulsive actions in volatile markets.

While an emotional compass can help direct many aspects of life, investing based on factors other than facts could steer investors in the wrong direction. There is no place for FOMO when it comes to trading, as successful investing strategies are rooted in data and a disciplined approach rather than being swayed by unpredictable emotional impulses.