Short for “Fear of Missing Out”.
This acronym is commonly uses to refer to the overall sentiment that often happens in bull markets where people get greedy and begin to panic-buy assets because the price is increasing and they’re scared they’re going to miss out on profits if they don’t buy as soon as possible.
FOMO is a strong driving force in the market and often is what causes the crypto markets to rise much faster than normal.
FOMO can also be dangerous because it causes people who don’t really understand the market nor the assets to end up spending money on something they don’t actually understand. Often, FOMO is much more pronounced at the tail end of a strong bull market, so you’ll have a lot of uninformed people rather blindly putting money into the market. Sometimes, this results in a big market crash because the bigger players in the market see all the greed and they begin to cash out and take their profits. This then cascades into a market crash and you can end up with a lot of new investors who just lost a lot of money.
So, FOMO is a very strong driver of the markets. But, it definitely has a downside to the inexperienced investor. This aspect of human psychology is best to be understood and monitored so that you don’t end up on the wrong side of it.