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FOMO, fear and frenzy? 5 tried and trusted approaches in times of volatility


By Bitpanda


Have you been glued to the crypto news over the last few months and are trying to figure out what is going to happen to your crypto? We’ve been feeling the same way. We’re not fortune-tellers, and no one can predict what will happen in the future, but one thing is for sure: educating yourself and making informed decisions in uncertain times is essential to ensure that you are well-set for what may lie ahead.

Whether you’re new to investing or you’re a seasoned crypto trader, by now you may be well familiar with the rollercoaster of emotions that comes during extreme market volatility. From the one side you’re being bombarded by talk of extreme fear and losing money, from the other all you hear is FOMO and investment opportunity. 

In any case, this kind of event can be a very trying time for investors, and you will need to figure out the best way for you to get through turbulent times. 

No matter which camp you see yourself in, these types of market events hold a number of universal realities that are important to keep in mind. So here are five tried and trusted approaches to ease your ride across the choppy waters of volatility. 

1. Meet volatility, your investment companion

Resist the urge to hide and learn as much about volatility as you possibly can. The term “volatility” has its origins in the Latin word “volatilis”, meaning something flying fast or fleetingly. In the world of finance, volatility is a measure of the intensity of price fluctuations over a set period of time. The term volatility is also used to indicate the risk or uncertainty involved in the price changes of an asset. Therefore, high volatility may cause drastic price fluctuations of an asset. 

During high volatility periods, the price of an asset will rocket up and sharply drop back down, sometimes within minutes, while times of low volatility are marked by much more stable price developments. New traders may only perceive increased risk during times of high volatility while experienced traders may regard it as an increased opportunity to profit. 

Some of the factors that influence volatility are: geopolitical developments, major political events, decisions by central banks, changes in interest rates, anything that has a major impact on supply or demand and many other factors. Volatility is an essential element of investing. If there is no volatility, there is no movement and hence no real chance of returns. 

As you see, volatility is a complex subject and is neither “good” nor “evil”. Volatility is a phenomenon that is an integral part of financial markets and will be your investment companion in some capacity wherever you go, so it pays off to educate yourself on the subject of volatility in depth.

2. Keep an eye on Dr. Greed and Mr. Fear

We are all human, and consequently, it’s safe to assume none of us are completely immune to experiencing the sentiments of greed and fear. Chaos in the crypto markets may lead investors to sell in panic when prices are tumbling or to blindly rush into buying an asset without first doing research as FOMO sets in. So first and foremost, keep in mind - at all times - that rushing into any type of investment decision on a whim may result in significant consequences for your asset holdings. How can you keep your emotions at bay when the markets go haywire?

Remember your investment strategy. As tempting as it may be, don’t stray away from the long-term strategy you set and don’t make spontaneous decisions driven by FOMO, or even act on them immediately. After receiving news or information that unsettles you emotionally in any way, take some time to let it sink in, assess it rationally and figure out what this means for your personal investment journey. Stick to your plan or at least re-evaluate it before making buying or selling decisions based on someone else’s tweets (looking at you, Elon), excitement or on the spur of the moment.

Don’t forget: the more confident you feel about your skills and knowledge involving any topic, the more likely it is that you can make rational and well-founded decisions.

3. Do what works for you with a savings plan

Thanks to the digitisation of finance, the world of investing is becoming increasingly open to everyone, at all times and everywhere. No matter if you have decided you love everything about cryptocurrencies and DeFi (are you staking yet?). Maybe precious metals or stocks* are exactly what you want - if you are in it for the long haul, setting up a savings plan for your favourite assets on Bitpanda takes out the stress of timing the market and helps to smooth out market volatility over the long term. 

Love your financial health: just like scheduling regular dates in your calendar for ensuring that you are keeping your assets safe, regularly revisit your risk tolerance, what is presently influencing it and why. The better your financial habits, the more comfortable you are likely to feel on your investment journey. 

4. Diversification is your friend

Make sure that your portfolio - the collection of the assets you are invested in - consists of a broad variety of different types of assets. This strategy is known as portfolio diversification and will help you sleep better at night because you can rest more easily in the event one or some of your holdings have fallen on hard times. 

The age-old saying of not putting “all your eggs in one basket” is also important for investors because different assets may perform better or worse in different market scenarios. So if volatile market times are giving you cold feet, why not use this time to learn about the different types of assets you could consider adding to your portfolio down the road? A great way to diversify your crypto portfolio is the Bitpanda Crypto Index for investing in the entire crypto market with just one click. 

5. Stay calm and get informed

And then there they are - those moments where you really feel at your wits’ end and like you just can’t deal with it. Don’t forget this: nothing, really, nothing lasts forever. Stay focused, fix yourself a cup of tea and explore the world of crypto. Here we’ve corralled a selection for you to read, listen, watch and discover: 

Remember that it is up to you how you invest and which decisions you make. You should never invest more than you can afford to lose. Check out the price developments of your favourite cryptocurrenciesstocks*, ETFs* and precious metals on our app for iOS and Android and start your investment journey.

The information shared in this article does not constitute investment advice. Investing carries risks. Make sure to conduct your own research before concluding a transaction. *Bitpanda Stocks are contracts replicating an underlying asset (a stock or ETF) and are brought to you by Bitpanda Financial Services GmbH. More information about the product and the prospectus are available at bitpanda.com.