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Millennials and zoomers are establishing new rules in different areas of life. Crypto trading isn’t an exception. Investors often mention abbreviations like FUD, FOMO and YOLO. Initially, these expressions had nothing to do with finance. They reflected an emotional state of people when a person's behavior was based on some kind of impulse, and not on the voice of reason.
Making decisions based on emotions is always a bad idea. And it is even worse, when it comes to money. That is the main topic of this article. We’ll see how FUD, FOMO and YOLO could affect your decisions to buy or to sell cryptocurrency. Let's see what these concepts are, talk about their differences and figure out a way to save your coins.
FUD is an acronym for "Fear, Uncertainty, Doubt". It is a market manipulation that is used to create panic and provoke traders to sell assets via spreading fake news. When a needed effect is achieved, some people use the market situation to their advantage. They buy an asset at a reduced price and earn on the difference in rates after the asset price returns to its previous level.
The great example of FUD is the news that Tesla wants to get rid of BTC. This information appeared on different resources on May 17, 2021. Some traders have sold their coins. As a result, fell by 20%, its price dropped to $45,000.
Fear, uncertainty and doubt – these feelings try to influence those who want to use other traders' emotions to their advantage. This is similar to “black” PR – when political strategists use false facts in order to achieve their goals.
During World War II, the Nazis flooded the besieged cities with propaganda flyers. They wrote that the outcome of the war was clear, high command was on the run and everything was bad. It spreaded the panic among people and distrust of the authorities.
So, when someone persistently tries to convince you that your government is discussing the possibility of a crypto ban, do not rush to get rid of your assets. At least until you find confirmation of this information in some trusted sources.
The concept of FOMO refers to the behavior, when all the actions of a trader are dictated not by logic, but by the fear of missing out on profit. This phenomenon is also called "panic trading". As a rule, such trading is based only on our emotional state.
To understand better what FOMO is, let's analyze the events of early 2020. In January, Bitcoin gained more than 20% in 5 days, and some FOMO-exposed traders believed in the same rapid growth in the price of BTC in the future. So they began to buy coins hoping to make good money.
However, in February, the growth stopped, and in March, the cryptocurrency price began to fall. The Bitcoin exchange rate has more than doubled in two days. Because of this, traders exposed to FOMO were selling their coins for significantly less price than they bought it. Yes, it works in two directions – a trader buys on emotions, hoping to make quick money, and sells in fear of losing everything without any analysis and strategy.
YOLO is short for “You Only Live Once”. It is used when a person acts in accordance with the need to get what he wants right now, without postponing it for the future, even if later this something will have more value. If someone, having earned on the stock market, does not reinvest his funds, but spends on expensive and possibly unnecessary things, this is called YOLO.
Let’s take for example native tokens of the Solana blockchain. On November 6, 2021, the Solana coin reached an all-time-high – $259.96. Lucky investors managed to patiently wait till these record levels, and they didn’t get under the YOLO effect, when just started to rise. Instead they carefully studied Solana price predictions and statistics. So they had better results.
Tips to get over your emotions
To avoid negative consequences for your crypto assets, we recommend:
- Carefully check any information that may affect the price of your crypto assets. Perhaps this is FUD – fake news that is used in order to provoke you to sell your assets;
- Turn off emotions and make a decision only based on a thorough analysis of the situation;
- Take profits, reduce risks to a minimum and do not try to get super profits quickly.
- If you don't know how to control yourself, start by trading only small amounts until you learn how to do everything right.
In other words, train your awareness. Don’t let your emotions rule your crypto life. Do you have any other tips than might help to fight FUD, FOMO, and YOLO? Share them in the comments below – let’s help each other to become better traders.
If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “Saga Solana MobileWhat’s New, Bitcoin?
