Emotional Investing is one of the most powerful and dangerous traps for new crypto investors.
This article isn’t about how to find the next 100x coin. It’s a rational guide for what to do after you see those returns, whether your own or someone else’s, so that you can participate in the market intelligently, not emotionally.
The Anatomy of 100x Crypto Coins
Many new investors are attracted to crypto because they’ve heard the stories of the coins that have 100x’d. They believe that what happened to others will happen to them, but you have to remember that behind those viral success stories is a lot of luck.
Survivorship bias fuels so much of the crypto market. You only see the winners, but for every person who’s made a life-changing gain, there are thousands of others who’ve lost big on similar high-risk bets. The losers don’t post their losses, and why would they? This creates a distorted view of how easy it is to succeed in these markets.
In these outlier events where people have 100x’d their money, luck plays a huge factor. It’s not a repeatable strategy; it’s the equivalent of a lottery ticket.
So don’t beat yourself up about missing huge opportunities, there’s always another one around the corner if you’re prepared and observant enough to spot it.
What to do when you have FOMO
We’re only human, so when you feel the urge to chase a skyrocketing coin, pause and take a moment, and go through each of these three steps:
- Go Over Your Goals
Think about your specific situation. Consider your starting capital, risk tolerance, and specific set of goals. Define your own game because every financial journey is unique. A 22-year-old trader, for example, can take on significantly more risk than a 45-year-old looking to save for retirement.
If you try to copy someone else’s strategy without understanding why they make the decisions they do, you’ll likely end up losing money. As investor Ray Dalio would advise, “Know what you don’t know.” Be honest about your own financial situation and build a strategy around it.
- Investigate Why
In 2021, the Squid Game Token launched with the promise of building an opportunity to play and earn in an upcoming online game. But when investors who had bought into the cryptocurrency realized they couldn’t sell, alarm bells were raised. Eventually, the developers of Squid Coin quickly cashed out their holdings and drained liquidity from the exchange.
Investors were left high and dry.
Instead of immediately jumping headfirst into an investment, ask yourself, “What fundamentals, if any, caused this coin to pump?” Warren Buffett once warned, “Risk comes from not knowing what you’re doing.” He advocated for investing in the things you know, because that’s how you stay ahead of the game.
- Make A Decision
Now it’s time to make your decision: do you buy or hold out for the next coin?
That being said, don’t rush into anything. Some investors follow a 24-hour rule: wait 24 hours before you make the decision to buy something. The rush of emotions may trigger a dopamine response in your brain that clouds judgment and prioritizes immediate actions over rational thoughts. While there are instances where you may have to act fast, it’s better to sleep soundly at night than live with the fear of missing out on what could have been if you stick to the 24-hour rule.
Data is the anti-FOMO
The only reliable way to combat emotional decision-making is to have a system that operates without emotion. This is where a disciplined, automated approach to investing becomes invaluable.
An automated platform like Peccala is the ultimate antidote to FOMO. Algorithms operate on logic, not hype. They analyze data and process millions of objective data points, including price action, trading volume, and market indicators.
This data-driven approach is designed to find any edge in market conditions. For instance, in 2022, a year marked by a severe crypto bear market, Peccala's strategies generated over $975,000 in profits for our users by identifying opportunities that emotional, panic-driven traders missed.
Our strategies are tested against historical market data to see how they would have performed. Emotional impulses, by contrast, have no track record and rely entirely on gut feeling.
By delegating execution to an unbiased system, you remove emotion from the equation and approach the market from a position of strength and strategy.
