The Dangers of FOMO: How Patience Can Save You Money

Two coins have been put in the spotlight over the past few weeks: Ripple (XRP) and Stellar Lumens (XLM). While these projects have been popular among traders and investors, I have personally been fonder of Stellar Lumens. These two projects have accomplished something impressive: they have maintained positive movement during a major, market-wide crash. With many traders seeing the prices of these coins explode, a new danger is being reintroduced to the market known as Fear of Missing Out, or FOMO.

Note: The point of this article is not to undermine these two projects, but to warn users about the possible losses incurred by chasing the hype.

A sudden massive increase in the price of XRP over the past few months.

What is FOMO?

The term FOMO is incredibly common within the cryptocurrency community, and you have probably heard a peer mention it. Fear of Missing Out is a natural reaction to seeing major movement in the market; when a coin price is climbing the charts day by day, it can seem like you’re the only one not profiting. This is what many traders are experiencing right now with Ripple and Stellar Lumens.

My goal with this article is to make people aware of the dangers of FOMO. Day by day, I see too much hype surrounding these projects with many people believing they will hit 1000% returns or overtake Bitcoin. While these are strong projects, we should be realistic with our predictions, and our expectations. There is a major problem across social media and trading sites that causes many traders to panic and buy at peak price. While it might seem like a good decision now, especially with everyone talking about the project, this could lead to some major losses.

Let me give you an example. Does this sound familiar?

A look at Bitcoin’s massive increase followed by a significant correction.

Think about the past year for Bitcoin, FOMO drove it from a measly $2,000 to over $20,000; bringing the entire market to new heights and attracting many new investors. I recall when the price was $18,000 and most traders were claiming Bitcoin was going to reach $50,000+ in no time at all. As of today, the price is $3,700. Many investors chased the excitement and hype and purchased Bitcoin at its all-time high, now they are at a major loss. Take a look at popular projects with similar hype to Ripple and Stellar Lumens, then compare their all-time highs to the current prices.

Verge (XVG) — Current Price: $0.007, All Time High: $0.30

EOS (EOS) — Current Price: $3.74, All Time High: $22.89

Litecoin (LTC) — Current Price: $33.36, All Time High: $375.29

Monero (XMR) — Current Price: $68.06, All Time High: $495.84

Dash (DASH) — Current Price: $111.19, All Time High: $1,642.22

NEO (NEO) — Current Price: $8.96, All Time High: $196.85

Tackling FOMO

I tend to disagree with the popular opinion and recommend traders avoid chasing the hype. However, if you do desire to purchase a coin with the chances to make a profit before it comes down, there are precautions you can take to minimize potential losses.

Avoid the Hype
In my opinion, it is preferable to miss out on potential profit than to buy at the peak of a coin’s price. While many people may claim that a certain coin will continue to skyrocket, remember that they probably own the coin and are attempting to increase the value of their investment further. Coins, stocks, everything naturally corrects. There has never been an equity that has gone up forever and cryptocurrency is no different.

“What comes up, must come down”

Ripple and Stellar Lumens have achieved incredible heights the past few days without fluctuation, correction is imminent. A few days ago, I posted a Ripple chart on TradingView speculating that XRP/BTC could fall 10% down to 9,000 sats. A lot of people criticized my chart and claimed that it was heading to 11,000+ sats. These remarks led to many inexperienced traders purchasing more Ripple at 10,100 sats. The next day, Ripple fell to 9,000 sats and those who failed to account for my chart suffered a 10% loss in a couple of hours. Traders need to understand one important point: just because someone says a project is due for correction doesn’t mean they think the project is going to die. In fact, I strongly believe Ripple will achieve those 11,000+ sat prices, but at a point such as this, I would take profit (or short) and re-enter at a lower price.

Chase the Hype
If you’re still convinced you want to take the trade, then don’t miss it! I understand how tempting it is to possibly make 20%+ when other investors have already made 100%+. My advice is to play it safe and set tight stop losses. Losing a small percent of your investment is a lot better than waking up to a 20%+ drop. With a tight stop loss, you can still have the chance to catch a moon, and if your coin goes south you will only lose a small percentage. For a better idea on how to set a stop loss or knowing what value to set it at, I highly recommend checking out my video on how to use a stop loss.

Use your own instincts to judge whether you should make a move or not.

Chat With Cryptocurrency Enthusiasts

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Learn From an Expert

Miles is the lead editor of Pure Investment’s Learning The Ropes publication which utilizes a variety of his own educational resources in order to teach traders how to do technical analysis, utilize smart trading strategies, and to share his experience. Miles has been trading for years and made mistakes on the way, like everyone else. Learn about how Miles took these mistakes and turned them into lessons and profit. Are you a new trader that has no experience? Look no further, as Miles will teach you everything he knows.

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