Cryptocurrencies have completely infiltrated the agenda of both social and traditional media and the relationships in our social circles. We hear that many people are interested in cryptocurrencies, 'buying and selling', making a fortune, buying at the bottom, or going bankrupt. We are curious. We also want to be part of this process and not miss out.
Indeed, a study has found data indicating that people with a higher sense of FOMO tend to invest more in digital currencies.
As particularly wealthy individuals have come into the spotlight during this process, it becomes increasingly attractive for us. In many cases, we almost inevitably use mental shortcuts. A mental shortcut (Availability Heuristic) is the tendency to behave appropriately by recalling extraordinary examples rather than general statistics related to a particular situation.
Since we keep seeing people who have lost everything because of cryptocurrencies alongside those who have made huge profits in the media, our chances of being among the winners seem higher than they actually are. Ultimately, the number of cryptocurrency multimillionaires in our memory is greater than that of cryptocurrency victims.
There is another situation regarding FOMO and cryptocurrencies. Let's say you invested in a platform, and after a while, your investment doubled. Isn't that great? You withdraw your money and go on that vacation you’ve wanted for a long time, or you renovate your kitchen. Happy ending... No, it doesn’t always work that way. Those who bought Bitcoin in 2016 saw their money double in 2017, and a large portion withdrew their funds. However, if they hadn’t withdrawn, their money would have increased 17 times in 2018. This lucky minority who didn’t withdraw their money in 2017 could have withdrawn 17 times their investment and be grateful for their luck for life... No, it’s not like that either. Those who didn’t withdraw in 2017 would have had 65 times their principal in 2021.
This example points to a historical reality, and almost everyone dealing with cryptocurrencies is somewhat aware of this surprising process of Bitcoin. Therefore, those who see their money increasing, even multiplying, hesitate to sell their digital currencies and convert them to cash because they think they can get much more if they wait. Of course, during this process, some make huge profits, but some also incur significant losses. The fundamental reason for their concerns is that they do not want to miss out on the potentially greater profits in the future.
A significant portion of cryptocurrency holders claim that after reaching a substantial profit, they withdraw their principal and keep only the profit invested to minimize the risk of loss to zero. However, very few actually do this. Because if there will be several times increase over time again, they will not be able to benefit enough from that profit because they withdrew their principal.