Riding the bull? Crypto FOMO and market timing
Introduction: The allure of the bull run 🐂
The crypto market is buzzing again—prices are soaring, headlines are screaming success stories, and it feels like everyone is cashing in. The Fear of Missing Out (FOMO) can be overwhelming, pushing many to jump into the frenzy. But before you dive in, let's explore why chasing these highs can be as risky as it is tempting.
The psychology of FOMO
FOMO is that nagging feeling that others are gaining experiences or making profits that you're missing out on. In the crypto world, this often leads to impulsive buying during market peaks.
Real-life Example: During the 2017 Bitcoin surge, many investors bought in at around $19,000, only to see the price plummet below $4,000 in 2018. Those who bought at the peak faced significant losses.
Volatility: The double-edged sword ⚔️
Cryptocurrencies are known for their wild price swings. While rapid gains are possible, steep declines can happen just as quickly.
Example: In May 2021, Bitcoin's price dropped from approximately $60,000 to $30,000 within weeks, erasing billions in market value.
Winners and losers: Timing is everything
- Winners: Investors like venture capitalist Tim Draper, who purchased nearly 30,000 bitcoins in 2014 at around $632 each, have seen substantial gains as Bitcoin's value increased over time.
- Losers: Conversely, those who bought during market peaks and sold during downturns often incurred significant losses. The internet is full of their stories too.
Risks of timing the market
- Buying high: Entering the market during a bull run can mean purchasing assets at inflated prices.
- Selling low: Panic during market corrections can lead to selling at a loss.
- Emotional rollercoaster: The stress of market timing can lead to impulsive decisions, often detrimental to long-term investment goals.
A smarter strategy: Regular purchases (Dollar-Cost Averaging - DCA) 💡
Regular purchases strategy means investing a fixed amount regularly, regardless of market conditions.
Benefits:
- Reduces impact of volatility: By spreading purchases over time, you mitigate the risk of buying at market highs.
- Promotes discipline: Regular investing fosters a disciplined approach, reducing emotional decision-making, taking out the psychology of gambling from the process.
How to start: The Invity mobile app offers user-friendly regular savings plans, making it easy for newcomers to adopt this strategy.
Try Invity mobile app for one-time and recurring bitcoin purchases:
Approaching the current bull run
- Do your homework: Educate yourself and understand the assets you're investing in.
- Diversify: Spread investments across different assets to mitigate risk. Bitcoin could be one of them.
Conclusion: Play the long game
While the allure of quick profits during a bull run is strong, the risks of market timing are significant. Adopting strategies like Dollar-Cost Averaging and focusing on long-term goals can lead to more sustainable success. Remember, in the world of crypto, patience and informed decisions are your best allies.