A recent study by Kraken shows that emotional triggers still play an important role in investment decisions. In fact, they can even override rational elements during this process.
The research highlighted the influence of factors such as “fear of missing out” (FOMO) and “fear, uncertainty and doubt” (FUD). After all, they can have a major impact on the formation of the current market cycle.
Kraken analyzed responses from 1,248 cryptocurrency holders. And the results were impressive: more than 80% of participants admitted that they make investment decisions based on these emotional factors (FOMO and FUD).
FOMO drives 84% of crypto holders to chase rising prices, while 81% say FUD causes them to hesitate or panic when selling, the study found.
Additionally, 63% of respondents acknowledged that emotionally driven decision-making negatively impacted their portfolios.
FOMO, FUD and investor behavior
FOMO seems to be the biggest influence on the behavior of cryptocurrency holders, compared to FUD. After all, 60% of respondents admit that their biggest fear is missing out on the significant appreciation of an asset.
On the other hand, only 17% of respondents said they were concerned about losing momentum in price declines. In this case, what would be at stake is the possibility of obtaining lower entry points to profit later on.
Prioritizing short-term gains over strategic accumulation helps explain why many investors buy during bullish periods over the long term.
Furthermore, the survey highlights the disproportionate influence of social media and other fast-moving sources in exacerbating FOMO. Around 61% of respondents follow influencers, in addition to following news outlets and cryptocurrency analytics platforms to gain market insights.
Of these, 85% admitted that emotional decisions linked to FOMO significantly harmed their portfolios.
The ease of access to information, often incomplete or sensationalist, contributes to impulsive trading behaviors, which predominate among cryptocurrency holders.
Age and gender influence behavior, study finds
Despite the acknowledgement that FOMO and FUD are quite damaging factors, the survey reveals surprising optimism among cryptocurrency holders about the future of the market.
For example, 68% of respondents believe substantial gains are still to come, even though 64% feel they have missed out on more lucrative opportunities.
Younger investors are optimistic, but less so than older investors. For example, only 36% of 18-29 year-olds and 49% of 30-44 year-olds expect to make significant profits.
The study also highlights gender differences. Male respondents are more likely than women to make decisions motivated by FOMO (66% versus 42%). They are also more likely to regret their choices. For example, 70% of men feel they missed out on big money opportunities, compared to 48% of women.
This may suggest that male investors are more impulsive in their strategies and suffer more when expectations are not met.
Earlier this year, a study in the International Journal of Mental Health and Addiction highlighted the risks of financial and emotional harm faced by cryptocurrency investors. These risks are especially acute for those prone to gambling and FOMO.
Based on responses from 487 investors, the study showed that impulsive traits, not the amount of time or money invested, are the main predictors of harmful behavior.
