Psychology and the Market Cycle in Crypto Market

FOMO – Fear of missing out

Fear of missing out, popularly known as FOMO is a type of traders psychology that makes traders enter the market because of their emotions. We see this a lor in a bull run or an uptrend movement. For instance, when the price of HNT is rising rapidly, some traders might not buy, however, when they see that the price is still up, they become impatient and would most likely buy Because they are thrilled by the price increase, they will decide to rush and buy as well. This action has two outcomes, either the trader makes profit if the price continues to go higher, or they will be at loss if they bought at the top and the price reverses.

Where in the cycle

FOMO occurs in the Thrill phase. The market consists of different emotional phases. FOMO occurs when the market is in an uptrend and creating higher highs. During an uptrend when the price of the coin is rising, the FOMO kicks in at the Thrill phase because the trader is amazed by the continuous price increase and becomes inpatient to join the train and make profit.

The main reason why FOMO occurs is because of the uptrend. When the price of a coin is rising and creating higher-highs, it will get to a point where the trader emotions becomes thrilled which is the main cause of FOMO in the market. Also, sentiments can be the reason for FOMO. For instance, when a big exchange like Coinbase announces that they want to list a coin, it would create FOMO in the market because traders would want to jump in so as not to miss the huge price pump that will follow after the listing.

FUD – Fear, Uncertainty, Doubt

Fear, Uncertainty, Doubt, popularly known as FUD is another type of traders psychology that makes traders exit the market because of their emotions. This happens a lot in a bear market or a downtrend. For instance, when the price of LTC is falling rapidly, some traders might not sell, because they are hoping that the price will go back up. However, when they see that the price is still falling, they will start having anxiety and if the price continues to fall, panic will set in and will be most likely exit. Because they are in panicking by the price falling, they will decide to rush and exit the market at a loss. This action has two outcomes, either the price might never come up again and the trader would be happy to have exited the market, or the price would later reverse back and rally up.

Where in the cycle does FUD occurs

FUD occurs in the Panic phase. FUD occurs when the market is moving down and creating lower lows especially in a downtrend or bear market. When the price of the coin is falling rapidly, FUD kicks in at the Panic phase because the trader is panicking and is afraid of losing all his money due to the continuous price decrease and later becomes inpatient to exit the market.

The main reason why FUD occurs is because of the downtrend. When the price of a coin is falling and creating lower-lows, it will get to a point where the trader emotions starts to panic which is the main cause of FUD in the market. Much like fomo, sentiments can also be the reason for FUD. For instance, when there is a huge negative news surrounding a particular coin, it would create FUD in the market because traders would anticipate a major sell off, and would want to exit the market so as not to loss when the price begins to fall.