What is FOMO and FUD? The Trading Minute

Your two worst advisors work for free. The first is called FOMO, fear of missing out, the fear of missing the train that pushes you to buy anything at the peak. The second is called FUD, fear, uncertainty, and doubt, the trio of fear, uncertainty, and doubt that drives you to sell everything at the bottom. These two ruin more individuals than all the crashes combined, often in the wake of a simple tweet. After revenge trading, the column continues its exploration of the trader's brain. Hold on tight.

FOMO and FUD, definitions of the two fuels of the market

FOMO is a buying emotion. The price skyrockets, everyone is talking about it, the gains of others become unbearable, and you click, late, high, too hard. FUD is its selling mirror, fueled by rumors, anxiety-inducing headlines, or vested interests. In both cases, the decision does not come from your analysis; it comes from the crowd. Sartre had the right word.

Note the nuance of usage. In crypto jargon, "doing FUD" also refers to the deliberate creation of negative information to drive down an asset. The emotion is human; its exploitation is an industry. And both thrive all the more as the crypto market is open continuously, without a closing bell to let the fever subside. The FOMO/FUD cycle in one week of May 2021. Diagram: Journal du Coin

May 2021, the case study of Musk: from FOMO to FUD in five days

Let's rewind to a week that remains in the annals. At the beginning of May 2021, dogecoin skyrocketed by 41% in 24 hours and hit a record of around $0.89, driven by the euphoria surrounding Elon Musk's appearance on Saturday Night Live. That evening, on May 8, DOGE collapsed by nearly 30% during the show, with the guest himself calling his favorite cryptocurrency a scam in a joking tone. The buyers at the record high were not laughing.

Four days later, the reverse happened. On May 12, Tesla suspended bitcoin payments for environmental reasons, and nearly $365 billion evaporated from the crypto market. FOMO on the way up, FUD on the way down, all triggered by a single man and two announcements. An involuntary masterclass in market psychology.

Vaccinating against FOMO and FUD as a retail trader

The vaccine exists; it is called the pre-written rule. A plan that sets what to buy, at what price, for what amount, and with what exit, written on a calm day, then executed on stormy days. Mechanical strategies like DCA rely exactly on this, removing the decision from the moment when emotion screams. Add a simple hygiene rule: less social media on record days, in either direction. Also, keep a journal of your trades; nothing vaccinates better than reviewing your own peak purchases.

To broaden the perspective, FOMO did not wait for crypto; the Dutch tulip of 1637 and the Internet bubble of 2000 already told the same story, only the speed has changed. A tweet today does in a few minutes what newspapers took weeks to produce. Emotions have not accelerated. Their dissemination has.

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