It wasn’t “virus”, “pandemic”, or “COVID”… “bottom fishing” was the phrase I heard the most in 2020 when the COVID-19 pandemic began to affect Vietnam. Exactly a year ago today, the stock market opened with a fiery red session just after the patient N-17 was identified overnight.
Since then, almost in every chat group I participated in, at least one person would type the phrase “bottom fishing”. Stocks were falling, and that would be an investment opportunity for everyone. The market’s long-term recovery was inevitable.
“Just give me the money, leave it there for a few months, and when you come back, just give me 30% of the profits. I promise it’ll be profitable,” a friend of mine confidently said. And so, one participant, two participants, by the fourth nod, I decided to invest.
That’s how I got involved in the stock market, without needing to know how to read financial reports, track stock prices, and even without opening an account on an exchange.
But that wasn’t the strangest story. Exactly one year later, Bitcoin’s price began to rise above 50,000 USD, dragging up the prices of all cryptocurrencies. A new trend emerged on social media that was even crazier than bottom fishing: mining Pi cryptocurrency on your phone.
Someone across the Pacific created an app that anyone with a smartphone in Vietnam could download. The provider promised that you just needed to take a photo of your passport or driver’s license, then open the Pi app once a day to have your phone automatically mine cryptocurrency.
Moreover, this once-a-day attendance mechanism ensures that your phone won’t drain its battery or heat up while cryptocurrency continues to flow into your account. “You lose nothing” is the next phrase that bombarded all the newsfeeds and comments I read about Pi.
A friend of mine installed Pi, then two others, and soon dozens of people were boasting about having the Pi app on their phones. But this time, I decided not to participate.
Unlike “bottom fishing”, Pi Network is clearly a pure FOMO investment, a fear of missing out when everyone has the opportunity to seek infinite returns from an initial investment of 0 Dong. This means anyone can join, and they may have already joined. If you don’t get in, everyone else will become millionaires except you.
Fear, not opportunity, is what drives a segment of investors into Pi. Simply because they aren’t investing anything, and the promises from Pi Network are something that anyone rational can see will never come true.
But what if it could? This coin – due to a mechanism that has never existed before – might increase in value like Bitcoin?
After all that you’ve researched and you still think so, welcome to the world of FOMO investors.
FOMO (Fear Of Missing Out) was first defined in 2004 by American venture capitalist Patrick James McGinnis. It is a social anxiety where a person believes that others are making their lives better while they are not, thus they feel compelled to follow suit.
“Making life better” is a broad description that encompasses many actions, from simple things like watching a movie, attending an event, exploring a famous tourist location, to jumping into a new profitable investment channel…
To illustrate this more clearly, let’s consider a few scenarios: The most common example is when a new movie hits theaters and everyone is talking about it on social media: from the press, celebrities, reviewers to your friends. FOMO now makes you wonder: Should I go see it? It sounds good based on what everyone is saying.
The FOMO effect in investing actually operates on exactly the same mechanism. Suppose you’re a new investor entering the market. By rule, you would need to join a group of other investors to gather information and seek opportunities.
Everything would be perfectly normal until the market experiences a significant fluctuation, such as a stock price surge or a cryptocurrency spike. At that point, naturally, everyone in the group would be discussing it extensively. As a new investor, the information simply flows into your ears without thorough analysis.
What you’re most concerned about is profit and the promises being thrown around. The problem is those promises often come with invitations to buy in, making you feel afraid of missing out on opportunities that others seem to be seizing.
This FOMO mentality will keep you glued to tracking prices daily, even hourly. And after a while of seeing prices steadily increase, you decide to invest because it seems safe and profitable.
FOMO is essentially a feeling rooted within each of us, tied to fear, greed, and a comparative mindset. But by rule, these mentalities are also triggered by external influences. For FOMO investors, the primary and decisive factor is the market’s volatility.
Market volatility is the trigger for regret and fear of missing out. Remember the first time someone invited you to invest in Bitcoin? What was its price then, and what is it now? How much could you have made if you had decided to invest back then?
The year 2017 is considered the successful IPO year for Bitcoin when its price first surpassed 1,000 USD at the beginning of the year and increased 17 times within just 12 months. A slew of dollar millionaires appeared after this price surge, leaving those who missed the investment invitation in their spam folder from years ago feeling regretful.
The volatility of Bitcoin’s price was even more terrifying if we look back to 2010. A man made history by using 10,000 Bitcoin to buy 2 pizzas from Papa John’s. At that time, Bitcoin was worth nothing. But now, we know he bought 2 pizzas for 100 million USD.
Winning or losing streaks are the second factor that can stimulate the FOMO effect in investing, especially in trading. The thrill of recent victories can make you sensitive to new opportunities and dive into them quickly based on emotions.
Conversely, continuous losses will create a mindset of recovering and seizing opportunities that you think the market is offering you. When emotions drive investment decisions, FOMO will sneak in to manipulate you.
The interesting thing to note here is that FOMO affects those who have already entered the market more quickly than those who haven’t set foot in it. Those who have purchased cryptocurrencies or participated in various investment channels will be more interested in the cryptocurrency FOMO wave than those who have never lost or gained money from this investment channel.
News and rumors are the third factor. Look at the case of Pi Network. This cryptocurrency currently has a value of 0 USD, and even at its most volatile moment, the price of one Pi was only 0.007 USD. So what triggered the incredibly strong FOMO effect for Pi Network?
Nothing other than rumors and promises. The founders of Pi Network have outlined a development scenario for this cryptocurrency consisting of three phases: beta, testnet, and mainnet, with the promise lying in the final phase, wherein the Pi coin will be listed and have real exchange value.
In the current phase they call testnet, Pi has a value close to zero, but there are rumors that someone used 500 Pi to exchange for a Triumph 900 cc motorcycle worth about 100 million VND.
The dream about Pi currency has even been exaggerated with comments that it could reach Bitcoin’s value. But blockchain and cryptocurrency experts have warned that there is no basis to show that Pi will have any value.
The mechanism of mining Pi on your phone is no different from daily attendance; it does not have the transactional validity like mining Bitcoin. The only labor that creates value on Pi Network is providing your personal information and inviting others to join and continue to provide their personal information to the network.
This will lead Pi Network to collect a massive amount of user data that has now surpassed 10 million people. Experts believe that they can use this information to sell advertisements and kick off the mainnet phase from there.
However, even if this scenario occurs, investors also believe that when the Pi coin hits exchanges, it will be sold off to the point that its price will return to zero. This may also be why the Pi Network founding team has not and will never launch the phase they call the mainnet.
Some personal information may be what you lost with Pi Network, but for many investors and FOMO trading on other exchanges like Bitcoin or stocks, emotions have caused them to lose real money, and lose a lot more than that.
Look at the chart below that depicts the stages of a typical FOMO investor. It’s called typical because most emotion-based investors will follow this exact graph. They will start on the upward slope of an investment, of course, only when the market is highly volatile will FOMO appear.
For example, a FOMO investor decides to buy 1 Bitcoin at 10,000 USD at the end of 2017. With expectations and rumors that the price of Bitcoin could rise to 100,000 USD, this investor will hold onto their cryptocurrency for the long term until it peaks at 17,000 USD. If the price of Bitcoin begins to drop, they will reassure themselves that it’s just a slight market correction and continue holding.
But when the price of Bitcoin plummets, the investor starts to feel panic. A reverse FOMO cycle emerges here as Bitcoin’s price fluctuates in the opposite direction. Bad rumors replace good ones. Feelings of anxiety and fear replace excitement and restlessness. People sell off instead of buying in.
At this point, the FOMO investor decides to sell their Bitcoin at 7,000 USD to cut losses. Ultimately, they will incur a loss of 3,000 USD before Bitcoin rises again and triggers a new FOMO cycle.
Of course, you might argue that if the FOMO investor sold their Bitcoin at the peak, they would be lucky to make a profit. But the real problem in being a FOMO investor is you can never know when and where the peak is.
All you rely on is emotions influenced by others and external factors. At that point, the FOMO wave will engulf you; all the information you gather around you is just the halo of the FOMO effect.
During this cycle, FOMO investors will have to engage in a battle between psychology and information. These two factors are always competing to capture the attention of a curious investor who is very vulnerable because they always rely on other people’s opinions to make their investment decisions.
Ironically, in the world of cryptocurrency, the opinions of others can cause you more harm than profit, explains Bobby Azaryan, a Ph.D. in philosophy and cognitive neuroscience.
For these reasons, FOMO always attracts amateur investors to jump into the market during overheated periods. And that presents an opportunity for other professional investors, the sharks who hold a significant portion of the market and can manipulate it to profit with a cool head.
So, if you see your investment decision being manipulated by the fear of missing out, greed, reckless risk-taking, or impatience, then it’s time to be cautious of FOMO.
If you look at FOMO in life in general, you’ll find it has the greatest impact on Gen Z and Millennials. Early exposure to various new connective technologies such as the internet and social media has led around 62-67% of Gen Z (born from 1997-2002) to be influenced by the FOMO effect and will compare what they’re doing with others’ lives.
The number is even higher among Millennials (born from 1980 to 1996), who reached adulthood during the use of the internet and Facebook. About 7 out of 10 (69%) Millennials are affected by FOMO.
A 2019 survey by Charles Schwab showed that spending decisions of Gen Z and Millennials are heavily influenced by the FOMO effect:
But when it comes to emotional investors, Millennials overshadow Gen Z completely. Because in the age range of 24 to 41, they are more present in the market. While FOMO affects Gen X and earlier generations less, Gen Z is simply too young and most do not have the finances for investments.
Therefore, when mentioning a generation of FOMO investors at this time, we can identify them as early 8x and 9x individuals. A study by research firm CB Insights estimates that this generation is inheriting a fortune up to 30 trillion USD, and FOMO is consuming their money.
Fabrizio Campelli, Global Head of Asset Management at Deutsche Bank AG, stated that social media is driving the investment decisions of the Millennial generation. They have a fear of missing out because they are more exposed and connected than other generations of investors.
That’s also the weakness that some investment platforms have used to attract Millennials, such as eToro, a trading website that allows you to literally “copy” every investment decision of others with just a few clicks and completely satisfies your FOMO feelings.
Investment trends in stocks, cryptocurrencies, or even multi-level marketing also exploit this FOMO mentality of Millennials to attract them to participate. So how can one avoid it?
If you are a Millennial, using social media, and all your friends are participating in some investment trend whether it’s cryptocurrency or stocks, it will be hard for you to avoid being influenced by FOMO. But as investor Warren Buffett once said: “Only when you combine intelligence with emotional discipline can you make the right decisions.”
Therefore, before making a decision to enter an investment market, you really need to study and understand the field and the “playing field” you intend to enter. Ask yourself if you are making decisions too quickly just because of FOMO? Are you truly investing or speculating and playing a gamble?
The process of learning and understanding will certainly take time; you may fear that this investment opportunity will slip away. After all, that’s the nature of FOMO, the fear of missing out. But don’t worry, knowledge, not a price spike, is what you will need most when entering a new investment market.
Opportunities will always come like buses – many thought that Bitcoin only had one last price surge in 2018, but ultimately, in 2021, this coin still broke the record price. If you do not research carefully before entering the cryptocurrency market, you may lose money before learning a lesson. Conversely, even if you win, it is merely luck akin to betting.
And do you remember the winning and losing streaks? FOMO will continue to influence you in your next investments or trades after you have stepped into the market. This means that becoming a long-term investor does not guarantee you will avoid FOMO.
It can still cause “overtrading” errors, buying and selling too much in a short time, taking profits or cutting losses too early, investing beyond limits, and chasing fleeting news… And most importantly, FOMO continues to make you act based on your emotions rather than market analysis.
So how do you control this situation? Here are some tips that may help:
Additionally, you can overcome FOMO by distracting your attention away from the urge to act, in this case, the investment invitations. Turn off your computer, disconnect from social media to practice mindfulness, step back to consider it thoughtfully.
Focus on gratitude, on what you have, the plans you have set for yourself instead of being pressured to follow societal trends, a small group, or anyone else. And whatever your decision may be, don’t let yourself be tormented by what you missed out on.
FOMO can be transformed into JOMO (Joy Of Missing Out) depending on your psychological perspective. If you feel you have truly missed an opportunity, remind yourself that there will always be other opportunities in the future that are better suited to your investment plans, or even your life plans. All you need to do is write it down in a journal and relax!
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