The fear of missing out (FOMO) effect in cryptocurrency trading : analyses of mass behavior and its consequences in the era of unpredictable extreme phenomena

Abstract

PURPOSE: This study aims to investigate psychological and behavioral mechanisms and their impact on the cryptocurrency market. The analysis is carried out through the prism of studying the FOMO phenomenon.

DESIGN/METHODOLOGY/APPROACH: The author describes the research methods used, including analysis of market data from major cryptocurrency platforms (e.g., Binance, Coinbase), sentiment analysis on social media (e.g., Twitter, Reddit), as well as surveys and interviews with individual investors. Statistical tools and econometric modeling were used to identify correlations between investor emotions and cryptocurrency price movements.

FINDINGS: It was noted that sudden increases in cryptocurrency prices often trigger the FOMO effect, which leads to mass purchases and further price drive. A clear correlation was shown between the FOMO effect and the so-called unforeseen extreme phenomena, manifested by an increase in FOMO intensity during periods of dynamic price changes. Sentiment analysis indicates a strong correlation between positive media messages and price increases. In addition, survey studies confirm that it is mainly individual investors who make decisions under the influence of emotions, not guided by rational analysis.

PRACTICAL IMPLICATIONS: The FOMO effect contributes to the creation of speculative bubbles that can end in violent crashes, ultimately causing significant losses for investors. However, in the short term, i.e., before the potential bubble bursts, the FOMO effect stimulates growth by encouraging investors to make behavioral decisions. The analysis also shows that mass impulsive decisions can lead to unpredictable and not always unfavorable financial consequences for investors.

ORIGINALITY/VALUE: This research contributes to the growing body of literature on behavioral behavior in one of the most emotion-prone markets, cryptocurrencies.