Negative emotion, positive consequence? Will the cryptosphere see a cryptocurrency rush in 2022, with investors increasingly afraid to miss out on the opportunities offered by bitcoin (BTC) and its younger siblings? This fear could actually be a driver as well as a brake on the adoption of cryptocurrencies.
FOMO and cryptocurrencies: driving the adoption of bitcoin and its younger siblings
In a December 17, 2021 interview with Yahoo Finance, BlockFi platform co-founder Flori Marquez cited factors that would favorably contribute to the adoption of cryptocurrencies in 2022. Marquez mentions the arrival of qualified experts in the crypto industry, regulatory clarity, as the engine of cryptocurrency growth for next year.
These factors, combined with a rise in the price of cryptocurrencies, are favorable, according to Marquez, to the creation of a atmosphere of Fear of missing out (FOMO). The latter is a feeling of fear among investors who fear missing out on an opportunity – by not investing, for example, relatively early in an asset.
To support this thesis of a FOMO in 2022, Marquez describes the behavior of the majority of BlockFi customers who prefer HODler bitcoin that they earn, rather than sell them – certainly waiting for better sales opportunities.
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FOMO and investors: different reactions to each profile and crypto
Can FOMO Really Help Increase Cryptocurrency Adoption? Investors who are won over by this sentiment may react differently according to their assessment of the level of risk to be taken, and their apprehension in relation to the latter:
- The most cautious prefer to align their behavior with the proverb: “when in doubt, abstain”.
- The most daring will prefer to bet and lose, rather than stay on the sidelines and regret it afterwards.
Marquez appears to be basing himself on the behavior of the majority of BlockFi customers who hold their bitcoins, to somehow infer that most cryptocurrency investors will have the majority the second profile described above, regardless of the cryptocurrency.
However, we should remain cautious before generalizing. Bitcoin has proven to be a store of value, and Long-term HODler has paid off. A FOMO compared to bitcoin is therefore likely to lead to risk-taking on the part of investors who are based on past fluctuations in the price of cryptocurrencies.
A FOMO applied to a cheap cryptocurrency like the Shiba Inu (SHIB), whose hopes of strong growth are modeled on the past explosions in the price of its competitor the Dogecoin (DOGE), can also lead to a strong adoption of the SHIB : it’s inexpensive, and the potential gain – even unlikely – is huge.
A FOMO targeting other cryptocurrencies is not, however, not necessarily favorable to the adoption of the latter. We should see it on a case-by-case basis, refraining from generalizing by induction from a particular case.
In fact, is a FOMO desirable for cryptocurrencies in general? This sentiment can be at the root of irrational decisions among investors. It can also be the source of speculative bubbles, the explosion of which will cause significant losses to investors who have not been able to liquidate their positions in time.
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