Noob mistake #5: FOMO part 2 -- Falling prey to hype
Here’s another one I have fallen for despite knowing how foolish it is. Humans are so emotionally driven that it is easy to get caught up in the moment even when your rational mind should know better.
Fortunately I have’t done this one much but I did make the mistake with Einsteinium (EMC2). I tend to be quite thoughtful with what I purchase. I like to research the team and the product and ensure they are actually trying to make/do something rather than simply piggybacking off the idea that everything blockchain is golden. Well, then EMC2 caught my eye not as a project but simply as a big day-over-day spike in coin value/market cap.
I watched it for a few days as it shot skyward. Without any real diligence on my part, I dropped the equivalent of $50 USD into EMC2 at around $2 per. Well, here we are a few months later and it is hanging out at $0.30 per. That 85% drop serves me right for breaking my own rule.
So please don’t fall prey to hype. Whether it’s a pump and dump or some other reason for an outsized gain, unless you have done your diligence, by the time you are poised to act, the gain is likely to have already occurred. The only outcome that you should reasonably expect is to be the one left holding the bag.
This gets to a common thread through all of my posts so far. Do the work (research), make a plan, and (hardest of all) actually follow your plan regardless of what the market is doing or what the pundits are saying. In fact, if you intend to listen to pundits, you should generally do the opposite (since they tend to parrot the FOMO psychology).
Warren Buffet may not understand blockchain but he’s right to suggest that you should buy when everyone else is selling.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.