Welcome back,
In the last two blogs, I have been discussing really important things to keep in mind in the crypto market. In one of the blogs, I shared the importance of setting your targets when you start your investment or trading journey. In the second blog, I talked about the importance of diversification in the market, so that you can avoid losses and make sure to split your investment in a way that helps you get the most out of it. If you want to read them you can head over to my profile and do so.
What is FOMO?
Today, we are going to discuss another important topic, one that even experts in the market often get trapped in and that is known as the fear of missing out. So, what is the meaning of fear of missing out, or FOMO? FOMO is a situation where we see a token or a particular asset going up in a very short span of time, and when we see it rising, we start to chase it in hopes of making some profit from that token or asset as well and not missing it.
Let us understand the actual meaning of FOMO with an example to have a better idea of it. Let us suppose there is a token named A, and it suddenly pumps by 200%. Also, let us assume it is listed on Binance. So, what is FOMO? FOMO in this case would be to go and chase that pump, thinking that even though we have already missed the 200% gain, we don’t want to miss the next pump that might come in the token in coming days.
Don't become the Exit Liquidity for Whales
And since this token is listed on Binance, our brain tells us that we should trust it and try our luck. Now, there are two scenarios that can arise here. The first scenario is that we inject fresh money that we have with us, and we end up losing it. How do we end up losing it? Obviously, when we invest in a token that has already pumped by 200%, we can easily become the exit liquidity for whales.
The second scenario is where you don’t have fresh money and so you decide to compromise your long term holdings and enter this already pumped token. In this case, you are selling your trusted tokens and trying your luck with one that has already pumped by 200% or even more. What happens here is, first of all, you are compromising your long term holdings which you must have bought after decent research. Second, you are gambling on a token that has already pumped significantly, and there is a high chance that you will become the exit liquidity for whales.
In either of the two scenarios, you will lose a portion of your investment. While you are in that token hoping to make a 2x or 3x return, the people or whales who invested early have already made 200% gains. So, if the token goes up another 50% or 100%, they are likely to exit the market. But for you to make a 2x return, the whales would need to hold and not liquidate until the token reaches 400% of its initial valuation. There is a huge chance that won’t happen, and you will end up losing majority of your money or at least a significant portion of it.
Important Rule
That is why there is one rule you must always follow, never chase the pump. There are countless opportunities that will arise in the crypto market and you just have to find them, do your own research, and make sure to invest at the right time. Never chase the pump, because doing so will likely harm you. Maybe in a few tokens, you will make money, perhaps some will pump from 200% to 500% but in most cases, you will end up losing your money. So, it’s not a good idea to chase the pump. In my opinion, especially after spending seven years in the crypto industry, I can confidently say that doing something like that is not a good idea at all.
Your Money Your Decision
Don’t worry as I am not here to stop you from making your own investment decisions. But let us try to understand what to do if you still decide to invest in an already pumped coin. If you are planning to invest your money in a coin that has already pumped by 200% or 300%, I would first suggest checking the news to see if there was a specific event or announcement that triggered the massive pump. After reviewing the news, also look for any updates from the project itself, maybe there is a major development that contributed to the price surge. If you find that the pump is simply a short term reaction to news, it’s better not to enter that token.
Now, if you find that the news was something like a token burn or a buyback plan, then maybe you can consider doing a DCA (Dollar Cost Averaging) strategy into that token. If you really want to be safe, make sure to invest only 1–2% of your total capital and even that should be split into 10 different parts. This way, if the token crashes, you’ll be able to average your entry price. So, this is the strategy you should follow if you still plan to go after a token that has already pumped.
But as I always say, at the end of the day, it’s your money, and you have to make the decisions for it. However, I have shared how you can avoid losing your money by chasing the pump. I have been in the crypto industry for the past seven years and have been trading since 2018. I believe I have at least some experience to guide newcomers on what they can do and what they should be careful about, so they don’t end up losing their hard earned money.
Before I end this blog, I would like to ask a simple question to all the readers, especially those who are experienced traders or have been in the crypto market for more than 5 years. Have you ever found yourself in a situation where you chased a pump and ended up losing your money? Share with everyone in the comment.
Thank You and Happy trading everyone.
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