Markets are driven in the short term by the sentiment of those who buy and sell. The Bitcoin market and the crypto market in general is often driven by fear of missing out on the next big price surge. This fear of missing out or FOMO has to a large degree been replaced recently by what we are calling FOLA or fear of losing all. When the possibility of buying Bitcoin at $600 seems as likely as buying it at $40,000 it is not an investor sentiment likely to drive the cryptocurrency to another impressive high.
How to Invest If You Still Have Crypto FOMO
In March of 2022 when Bitcoin was still trading in the $40,000 to $45,000 range The New York Times published about if you want crypto in your portfolio and, if so, how to do it. As the crypto niche has matured, more and more options have arisen for how to add crypto to an investment portfolio. A pitchman in a Superbowl commercial touted crypto as the next big thing and cautioned folks not to miss out. That was when Bitcoin was only down $20,000 from its November 2021 peak.
While one can go to a crypto exchange like Coinbase and buy a Bitcoin or a fraction of a Bitcoin one can also buy ETFs that track various cryptocurrencies. The problem to date for a crypto investor is whether to buy and hold for the long term or try to time the market. The most impressive gains in the last few years would have come from precise market timing. Unfortunately, aside from industry hype, there does not appear to be a good way to predict where this market is going next. It is not a hedge against inflation nor a store of value in times of trouble. Even stablecoins have not been a secure place to put your crypto investments.
How to Invest If You Have Fear of Losing All in the Crypto World
There are a couple of questions in this regard. Will Bitcoin and others boom again or not? And will there be a fundamental or base value of cryptocurrencies based on their use in niches like non-fungible tokens, the Metaverse, or decentralized finance. In our article about whether or not Bitcoin will bounce back we noted that there are investors who are apparently still in for the long haul. The problem as we see it is that the abject failure of Bitcoin and others to protect against inflation or act as a safe haven asset when times are difficult has not been lost on the investing public. For many folks a new “story” needs to take hold based on crypto’s place in real world finance.
We have already seen crypto-related advertising beginning to focus on the Metaverse, NFTs, and DeFi. To the extent that one chooses to engage in the world of decentralized finance it would seem to be best to use stablecoins instead of other crypto tokens and to use stablecoins that are pegged to the US dollar instead of ones that use algorithms in an effort to achieve price stability. By doing so one can avoid being whipsawed with crypto price fluctuations when a loan payment comes due.
Crypto FOMO vs FOLA – SlideShare Version