I wrote an article about the dangers of crypto herd mentality at the back end of 2017. For anyone new to this space, this was a time when mass hysteria had seemingly taking over as Bitcoin climbed swiftly to its all time high.
Over the last six months or so, a lot of this hysteria has been subdued. It’s not as attractive for newcomers to jump in during a bull run.
I do, however, think that now is a good time to plan head. The next bull run is surely around the corner, and with it will come a lot of the craziness we saw in the past.
One of the first indications of such a turnaround is the mainstream media picking up on any kind of sustained Bitcoin rise. That kind of coverage drives an influx of newcomers to take the plunge into cryptocurrencies, with a shared dream of accumulating wealth. In many ways it’s fantastic news for all of us. After all, mass adoption has been spoken about for a long time, and it’s finally creeping into focus on the horizon. We’re not there yet, but we can just about make it out down the track.
With markets moving at a frantic pace these days, the overwhelming drive for many newcomers is to get rich as quickly as possible. Social media is awash with posts about ‘Lambos’, ‘When moon?’, ‘HODL’, and an array of other terms that scream a lack of respect for the markets that will crush your dreams as easily as they will grant them.
The Fear of Missing Out
FOMO. I’m sure most people reading this will have seen this acronym used in casual conversation. To my surprise, FOMO was even added to the Oxford Dictionaries, described as:
Anxiety that an exciting or interesting event may currently be happening elsewhere, often aroused by posts seen on social media.
The fear of missing out has become a major driving force behind the actions of individuals in the crypto world, and it’s becoming an issue. On the surface, FOMO is understandable. I don’t want to miss out on a chance to accumulate great returns on my savings, so I spend time researching the crypto markets and choose an area to invest in.
However, this can become a major problem. A lot of people are no longer taking the time to learn. The desire to understand the aims of the project you’re investing in appear all but lost to many. Determined to make a quick profit no matter what, herd mentality is well and truly taking over.
The Danger of Influence
I watched a live interview with John McAfee at the end of 2017 and found it fascinating. I won’t claim to know the ins and outs of McAfee’s life, but it’s fair to say that most people will have heard his name due to the McAfee antivirus software.
Here is a man with a household name and a fortune in the bank discussing cryptocurrency. It’s something I respect. McAfee has made his millions as a businessman and that’s something that I commend him for. Yet, as I continued to watch him speak about specific coins, I couldn’t help but feel that it was a slightly alarming situation.
Sure, everything was rightly prefaced with “…this is not advice” and so on, but I feel that those sentences are often ignored by the masses. McAfee (and others) have a huge social presence, and people are quick to jump in bed with anything that could be perceived as advice.
Pump and – you guessed it – Dump
Only a few days after watching McAfee’s interview, I spent some time looking at his Twitter feed. Interestingly, he’d decided to name individual projects he was interested in. The alarm bells started ringing immediately.
One such tweet went on to describe Electroneum as “the Holy Grail of cryptocurrency”. At that time, this very tweet had 1,100 comments, 2,900 retweets, and 6,700 likes. None of those figures include the actual overall influence of the tweet. It is certain to have reached a huge number of Twitter feeds.
I decided to have a quick look at the price of Electroneum before and after McAfee’s tweet, and was greeted with the following:
Almost immediately, McAfee’s tweet led to a huge pump in value, followed by a sharp dump and then a fairly rapid return to the initial value a few hours prior.
My issue here is not with McAfee. He has every right to talk about whatever project he sees fit. Instead, my issue is with with people catching the potentially fatal FOMO bug, and investing in something they have done zero research into.
There is no doubt in my mind that plenty of people bought in to this project at the new all time high, and quickly lost large sums of money. This would have been easily avoided had they spent the time to research the project, the team, and the market itself. If, after this point, they still wanted to invest then that is fine. It may or may not be the correct decision to make in the long run, but it’s a decision that’s been made with thought.
Ask Yourself WHY
This leads me to the main point of this post. When you’re dealing with investments, it’s important to ask yourself why you’re doing what you’re doing. If you can’t answer that question with anything other than “so and so told me to” then you should not be doing it.
Fortunes can and will be made in crypto investments. Financial losses can and will also be made. You can reduce the odds of this happening, though, if you actually take them time to do some research before parting with your hard earned cash.
Just food for thought before the next big bull run. Happy trading!