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Cryptocurrencies are one of the largest markets operating on a global scale. Being a global market, they are influenced by a large number of factors. Some of these factors include legal and political regulations, the current state of the economy, new technologies, supply and demand for currency, etc. However, there is a big factor that has a strong impact on the encrypted market, more than other financial markets.
This factor is abbreviated as FOMO.
Understanding FOMO
Millennials have coined the term FOMO, as an acronym for the "fear of losing". This feeling called FOMO is a great influence for investors that occurs during specific buying opportunities. Such opportunities that promise gigantic earnings create this particular fear and start to worry investors.
FOMO does not only affect the cryptocurrency market, but is also prevalent in other areas of financial trading. However, its greatest effects are seen in the crypto market.
What makes FOMO influential in the encrypted market
As stated above, the cryptographic market is the domain in which FOMO shows the maximum influence. The reason for its tremendous influence is that some cryptocurrencies have shown the greatest gains in the history of financial markets. An example of such digital tokens includes Bitcoin, Litecoin and Ethereum. As happened in the case of Bitcoin, the coins grew from the value of a few cents to tens and thousands of dollars.
Because of these staggering increases, most investors expect every other digital currency to have an immense growth opportunity. As a result, none of the traders and investors are willing to give up on making the most of this opportunity. Therefore, whenever the general consensus is that a specific cryptocurrency could potentially increase, FOMO comes into play. As a result, a large number of people start investing in that particular cryptocurrency for fear of losing big returns.
Furthermore, blockchain technology, which is gaining mass adoption globally, is the cornerstone of most encryption projects. As a result, the general mentality of this radical technology is that it would show exponential growth in the future. This type of thinking attracts more and more investors to invest in the cryptocurrency market.
When does FOMO occur?
FOMO often fits as soon as a potentially revolutionary and successful currency is launched. This is because mostly those investors enjoy the maximum returns that make the first investments. This was true not only in the case of encrypted markets, but also in other types of stocks. Some famous examples include Google, Tesla and Apple.
Similarly, in the cryptic world, investors who bought Bitcoin for only $ 50 to $ 100 in 2010 could earn millions of dollars at the time. Such high earnings instill fear to investors; what happens if a similar case occurs with other coins and they are lost. Therefore, a case of positive encryption establishes a positive expectation for all the others, fueling the FOMO.
Positive effects of FOMO on the Crypto market
One of the most noticeable beneficial effects of FOMO on crypto is its influence in driving its significantly higher value. However, it is not just the individual coins that collect the benefits of the FOMO effect. It is the entire cryptographic market that largely benefits from this phenomenon. As a result, currently there is an exponential increase in the number of people trying to invest in cryptocurrencies.
The growing user base of most cryptographic exchanges paints a clear picture of its beneficial effects. Known as one of the largest cryptocurrent exchanges in the United States, Coinbase was launched in 2012. However, only in the space of six years, the company has been able to reach more than 11 million users. The speed at which users add to this exchange is exponential. Such a case occurred after the CME group made an announcement. The announcement related to the addition of Bitcoin futures trading, resulting in the addition of 100,000 users per day.
This massive use by users in the encrypted market resembles similar historical cases influenced by FOMO. For example, at the end of 1890, this fear pushed hordes of people to extract gold in Klondike. As a result, many people call the exponential rise of cryptocurrency as a modern and digital version of the gold rush. Likewise, because of the relative FOMO effects, many have coined the term "digital gold" for bitcoins.
Therefore, the most noticeable effect of FOMO would be to direct more and more people to the encrypted market. This, in turn, could fuel the growth of the value of at least all the major cryptocurrencies.
Negative effects of FOMO on the Crypto Market
The "fear of losing" has not only positive effects, but is also full of risks related to cryptography. One of the biggest risks is that with FOMO, the prices of cryptocurrencies can increase at very rapid and unnatural rates. The result of this would be the considerable retreat in the encrypted market, following the passage of the user's fear.
A case like this occurred in the real world. In December 2017, the value of Bitcoin showed an exponential increase of about $ 20,000. The news of futures trading has stimulated that strong rise. However, when the FOMO passed, the price showed a sharp decline, amounting to $ 11,000.
Therefore, there is a high potential for investors suffering from losses if they rely on the FOMO phenomenon to invest. This loss could occur despite the general ups and downs becoming an integral part of the encryption.
Conclusion
FOMO is considered one of the major drivers, fueling the growth of cryptocurrency. With his constant record over the past 8-9 years, there is much less chance that FOMO will die soon. However, with the increase in the cryptocurrency managed by FOMO, there has been an increase in negative exposure on it. One of the biggest is the fear that governments will prohibit the use of cryptography and make their trade illegal. This happened in the smaller nations and China took a similar position against cryptocurrencies.
Therefore, if the cryprocurrecies begin to lose their celebrity, the FOMO effect would also shrink; in some cases they even completely extinguish.
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