Steemit Crypto Academy Contest / S11W01 - The Cycle of Market Emotions

The crypto space have been the talking point in the finance world of recent. Major countries are adopting crypto as a legal tender, a security and an asset.

Many peoples' attention are being drawn to the space giving room for them to learn more about it and invest.

The fact that it has come to stay is beyond reasonable doubt and as such even a layman needs to understand what it is all about.

This is why this week's topic in the crypto academy engagement is very vital

From this contest, we are going to learn of certain crypto terminologies and their meanings. This will give us insight into what ever transaction we are about to do in the cryptocurrency space.

Briefly defined the following Crypto related Slogans

Pump and Dump

These are terms used to explain fraudulent schemes by some individuals or group of persons with the intention of making money by pumping an asset.

They will pump money into the digital asset, buying up about 80% of it, causing artificial scarcity (Pump) and then prompting others to buy as the price is going higher and higher.

Once people starts buying into it, they will start a massive selloff (Dump) of their holdings of that asset. Hence driving the price down, causing many to lose their hard earned funds while making millions from it.

This is a type of fraud and scam. Many are stripped off of their hard earned resources by this means.

Going to the moon

This term is used to describe a substantive upward movement or trend of a cryptocurrency. It could be caused by a value created by the use of the cryptocurrency or due to in-ordinate purchase by investors, reducing supply and creating demand for it.

HODL

This is a term which means to hold a crypto currency for long term purposes. These set of investors are ready to buy and hold for up to 4 years and above.

REKT

It is a term used to describe a person who have sustained a very heavy financial loss while trading crypto currencies or in his investment.

BAGHOLDER

A bag holder is an investor who is holding one or more crypto currencies and did not sell off despite decrease in prices or value of the assets. Sometimes, he is left with worthless coin in his wallet especially if the crypto currency does not have a serious project behind it.

Cryptosis

This can be defined as a person who wants to learn everything about crypto currency and is always talking about it. We can say that the individual is obsessed about cryptocurrency and anything relating to it. It is a crypto currency obsessed disorder.

ICO

This means Initial Coin Offering by which a company seeks to raise new funds which it intends to inject in new areas of its business expansion.

It could be to create a new coin, develop an app, start Nft projects, etc. So the purpose is basically to raise fresh funds. The company seeks to reward its investors at this phase by listing the coin at a higher price so that they can gain by investing early.

Let's talk about FOMO

This is a crypto acronym meaning Fear of missing out. This is the pressure an individual feels when he thinks he is missing out on an opportunity. Especially so when the value of a coin is increasing and you are under pressure to buy into it to avoid missing out on further gains in price.

Where in the cycle does it occur? How can we deal with crypto FOMO

There is a point during an uptrend that investors are happy with the price increase. It is at this point that FOMO occurs because many would not like to miss the opportunity of further increase in the price of the coin. This phase is called the Thrill phase before Euphoria which marks the end of the uptrend and distribution begins.

At this point, many retail investors will notice the uptrend and would want to share a part of the pie, thereby ignoring what experience, art and strategies they know about the crypto market.

In order to deal with Fomo, we need to have a mindset that opportunities never ends. Being aware of this fact will assist one to stay away from the market, not allowing fomo to get a better of him.

Another thing that can help us is discipline. Discipline involves sticking to our trading tactics and strategies. Doing so will spare us the heartache that comes with FOMO, that is experiencing substantial loss in our investment.

What is the cause of FOMO and how can we prevent it?

Fomo is usually caused by lack of discipline in trading and investment, since we usually throw caution to the wind once we are caught by the frenzy to make money.

Greed is another factor that drives a person into FOMO. The desire to make money now or never is a problem. We do not want good thing to elude us.

Too much dependence on social media hypes and beliefs in them without doing our own research (DYOR). Most of the FOMOs that occur starts with social media hypings, making us feel that we are missing out on something great.

These work on our emotions and lead to impulsive investment that will not favour us at all.

how can we prevent it?

✓ Invest with long-term in mind.

Investors should know the reason why they are investing in a particular crypto currency. If the reason is to invest for long term, they will not Fomo, but if it is just to make short term profit, the investment will be driven by their emotions, hence acting with FOMO.

✓ Work with your strategy.

Every trader or investors have key indices he looks out for or chart patterns he see and decides to invest in a crypto or digital asset. Sticking to that strategy will save him the heartache that comes with FOMO.

✓ Discipline

This involves working hard to stick to our decisions. It also involves self control so that we cannot be affected or take a decision based on unconfirmed report from the media.

✓ Do your Own research (DYOR)

This is another slogan that is very important in the crypto space. Irrespective of the information heard, it would be wise to do some research in order to make informed decision on investment.

✓ Invest in a portfolio

This means that we invest in several crypto in different sectors of the space and unrelated. For example, invest in coins known for artificial intelligence, data management, internet of things, communication. This helps to spread our risk not allowing us to FOMO unnecessarily since not all assets in our portfolio can go down at the same time. Also, when there is an uptrend in a particular sector asset, we are sure to reap great gain too.

What is FUD?

FUD means fear, uncertainty and Doubt.

This happens when there are untrue and negative information about a crypto (especially about Bitcoin) that have no base. This is done to incite panic in the minds of the investors making them to start panic selling that crypto currency. When this happens, the initiator of the FUD makes profit from it. When holders of that crypto currency panic sell, prices drop and the initiator buys the digital asset at a reduced price, making much money since the price goes back almost instantly.

What is the cause of FUD and how can we prevent it?

° To prevent FUD, We need to confirm the source of the information. Is it reliable and trustworthy?

° Find out whether the source of the FUD have any relationship with the company it is spreading negative information against. Could it be a means of de-marketing and crashing the crypto so as to have an upper hand in the market?

° Ensure to verify information from the attacked crypto currency company's official website and advising investors to check the official website for correct information.

° Try to weigh and evaluate the news and then make a decision based on your experience and understanding.

Choose any crypto asset of your choice and through screenshots explain in which phase of the cycle FOMO and FUD occur.

I am using the crypto pair of SOL/USDT to show which phase FOMO and FUD occur.

Let us look at the chart below.

From the chart above, we can see that after accumulation, the price of SOL started moving. The uptrend was so fast that it took investors by surprise, early investors were already enjoying the profit arising from the uptrend. At a point in the uptrend, we had a bit of accumulation. The early investors are already thrilled, those with FOMO now entered the uptrend at the thrill phase expecting further move upwards to enjoy the profitability.

FUD occurs during theAnxiety and Denial phases. At those point, investors are uncertain of what is happening to the asset, which they expect to move up, but then, it continued to go down the hill.

This FUD will now cause them to start panic selling of the crypto asset leading to a crash in price.

Conclusion

This is a good reminder for many of us entering into the crypto space. And especially very timely now that another bull run is about to take place. There is need not to allow FOMO and FUD cause us to lose our hard earned funds.

Learning truly has no age limit. It takes determination. I have been able to explore these terminologies and truly learned what they are. What about you @eliany @drhira and @karianaporras? Let's see what you can learn exploring this contest topic

Good luck to you all!