FOMO and FUD are diseases that often infect many investors, creating uncertainty and panic in making investment decisions.

Controlling emotions and having a clear investment plan can be one way to ward off FOMO and FUD.

FOMO, aka fear of missing out, and FUD (fear, uncertainty, and doubt) are two psychological phenomena that often influence the behavior of many investors in the investment space, including crypto. Both terms describe emotional responses to social pressure and uncertainty, which often lead to impulsive and risky decisions.

When the market is bullish, these two words also become a separate sentiment that influences the movement of certain assets. Well, referring to the Journal The Influence of Fear of Missing Out (FOMO) on Financial Decision Making by Brian J. McGuire and Eric L. Johnson, it was revealed that when someone is afraid of missing out on a big opportunity, they tend to make decisions quickly and tend to be impulsive.

This condition usually occurs when seeing other people already getting big profits, thus creating pressure on the social and emotional side. If that has happened, their investment decisions become more vulnerable, because they will prioritize emotions over research and planning.

How Does the FOMO Process Occur?

The first gate of FOMO comes from circulating information. Those who hear that a certain token is soaring will put pressure on their psychological side and create an urge to buy, so as not to miss the opportunity.

After that, there will be fear and anxiety. It happens because actually, without realizing it, they start to be in a dilemma. Is the decision to join a certain asset right and can bring profit, or vice versa.

But often the emotions that arise actually defeat rationality. When that happens, FOMO has taken over and a bias called the availability heuristic appears. At that point, individuals rely more on new information (such as price spikes) to make quick decisions, without considering risk or fundamental analysis.

What about FUD?

As for FUD, it usually refers to fear, uncertainty and doubt that arises due to rumors or negative news. Referring to the Journal Fear, Uncertainty, and Doubt: The Impact of FUD on Cryptocurrency Markets by Bastian P. Müller, it is explained that uncertainty or negative news that spreads, be it bad rumors or unclear government regulations, can trigger emotional reactions among investors.

When that happens, they tend to make decisions based on emotions that lead to panic selling that they think can avoid losses. Well, if that happens massively, it can make market conditions fluctuate, along with the heavy selling pressure.

This study highlights that the uncertainty created by FUD can make the market very volatile, as investor decisions are more influenced by fear than rational data analysis.

Investigate Avoiding Losses in the Crypto Space

Both FOMO and FUD often end in a pit of losses. Many even end up having to swallow a bitter pill because their entire investment portfolio turns to dust. So how can you manage your psychology to avoid losses in the dynamic crypto space?

  • Control Emotions with Mindfulness

Developing self-awareness can help reduce the impact of FOMO and FUD. Mindfulness techniques can help investors stay focused on long-term goals and avoid impulsive decisions that arise from fear or anxiety.

  • Use Critical Thinking and Analysis

To avoid confirmation bias - seeking information that supports a belief - it is important to critically evaluate each piece of information and seek out different views.

  • Set a Clear Investment Plan

By having a structured investment plan and following the theory of self-control, investors can avoid impulsive behavior. Create profit and loss limits, and exit strategies from the wild market.

  • Portfolio Diversification

Diversification is one effective way to reduce dependence on a single asset. That way, investors can avoid excessive stress that can affect decision making.

  • Understanding Cognitive Bias

Understand various cognitive biases such as anchoring bias, which focuses too much on certain information, and overconfidence bias, aka excessive self-confidence that underestimates the various risks in making each investment decision.

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