6 ways to beat crypto FOMO
In recent weeks, the crypto market has been surging, with bitcoin and cryptocurrencies breaking records and grabbing attention around the world. Trump’s recent U.S. election win has only added to the frenzy, creating big swings in prices and sparking a fresh wave of “FOMO”- the fear of missing out.
Seeing people post their gains or reading headlines about bitcoin reaching new all-time highs- like its recent jump past $89,000 (price as of 12Nov’24 06:56am UTC) surpassing even silver in market value can make anyone feel left out.
It’s natural to feel the fear of missing out. But while the hype is real, diving in without a clear plan can lead to costly mistakes.
6 Ways to beat crypto FOMO
This guide is here to help you make smart choices, so you can enter the crypto market confidently and responsibly, without risking more than you can afford.
💰 Set a budget and stick to It
One of the biggest mistakes new users make is allocating money they can’t afford to lose. Before buying crypto, it’s crucial to determine a budget that fits your financial situation. Here’s how to do it:
- Review your finances: Take a look at your savings, expenses, and any disposable income. Decide how much of that can be safely allocated to your portfolio. This should be money you are okay with leaving in the market for the long term.
- Start small: In a bull market, going big is tempting, but crypto can be volatile. It’s often better to make smaller contributions gradually, perhaps a manageable percentage of your income each month.
- Avoid debt and high leverage: It might be tempting to use credit or leverage to buy more assets, especially with recent rate cuts making borrowing cheaper. However, this can amplify losses if the market dips.
🔁 Dollar-Cost Averaging (DCA)
Dollar-cost averaging (DCA) is a strategy that involves buying a fixed dollar amount of crypto at regular intervals, regardless of its price. This approach can help smooth out the impact of market volatility and reduce the emotional rollercoaster that often comes with getting into crypto.
For example:
- If you plan to put $1,000 in bitcoin, consider breaking it down into smaller amounts, like $100 per week over ten weeks. This way, you are buying at various price points, which can help you avoid buying all your crypto at an inflated price during a bull run.
DCA is particularly helpful during a bull run when prices are high, as it helps mitigate the impact of any potential downturns.
➡️ Choose the right entry points
While timing can be crucial, it’s nearly impossible to predict when prices will peak or drop. Instead of trying to time the market perfectly, consider these practical strategies:
- Wait for Dips: Even during a bull market, the crypto market experiences occasional pullbacks. Rather than jumping in at a high, wait for these small corrections and use them as entry points.
- Set Limit Orders: If you have a target price in mind, consider setting limit orders to automatically buy when the asset reaches your desired level. This way, you are not constantly watching the market but still have a strategy in place.
- Monitor Large Moves by Institutions: Major moves by institutions can impact market sentiment and often lead to FOMO among retail users. For instance, Germany recently sold nearly 50,000 bitcoins, netting around $2.86 billion. While strategic for Germany, such moves can influence prices and lead some retail users to make hasty decisions. Observing these actions without responding impulsively can help you find more strategic entry points.
📊 Do your research and diversify
The crypto market offers thousands of coins, each with different purposes, technology, and levels of risk. Here’s how you can approach crypto with a well-rounded perspective:
- Research the Top Coins: Start by understanding the fundamentals of established coins like bitcoin and ethereum, which are often seen as safer choices. Learn about their purpose, development team, and roadmap.
- Consider Stablecoins: If you want some exposure to crypto but are wary of volatility, stablecoins (like USDT, USDC) offer stability by being pegged to the US dollar. They can be a good option for earning interest in the crypto space without high risk.
- Diversify: Instead of putting all your resources into one or two coins, consider spreading your funds across several assets. For instance, Dogecoin recently surpassed USDC in market cap- a surprising shift that highlights the market’s unpredictable nature. Diversification can help protect you from the risks associated with having all your resources in a single asset.
😇 Manage your emotions and stay informed
The crypto market’s high volatility can lead to emotional reactions, which often result in hasty decisions. Here are some tips to help you stay grounded:
- Ignore the Noise:Social media can amplify FOMO, with people sharing only their gains and not their losses. Remember to stick to your own plan rather than getting swayed by the hype.
- Stay Updated, But Don’t Obsess: Follow crypto news and trends, but try not to check prices constantly. Set specific times to review your portfolio and catch up on updates, so it doesn’t consume your daily routine.
- Have an Exit Strategy: Knowing when to take profits can be as important as knowing when to buy. Decide in advance what your goals are (whether it’s reaching specific profit percentage or a financial milestone) and stick to them. This approach can help prevent panic-selling if the market dips.
⏳ Be prepared for long-term commitment
Crypto can offer great opportunities over the long term, but it’s not a guaranteed way to get rich quickly. Patience is often key. Those who entered the market years ago and held through ups and downs have generally seen the best returns.
For example, those who bought Bitcoin years ago and held onto it have seen significant gains during recent bull runs. The Fed’s recent rate cutsmay make crypto even more appealing, but it’s best to approach it with a long-term mindset rather than expecting quick profits. While short-term gains can happen, the most stable results often come to those who invest with patience and a focus on the long term.
Conclusion
Entering the crypto market during a bull run can be exciting, but approaching it with a clear plan is essential. By setting a budget, practicing dollar-cost averaging, choosing strategic entry points, diversifying, managing emotions, and staying committed, you can build a foundation that helps you navigate the crypto market’s highs and lows.
FOMO is a powerful motivator, but with the right approach, you can make calm, informed choices that protect your resources. Crypto is a journey- take it one step at a time and make it work for you responsibly.