One of the major reasons behind the pumping of bitcoin’s price when a bull-run arrives is FOMO, short for “fear of missing out”. Recently, as bitcoin’s price rose up, BlockPublisher got in touch with the Chief Executive Officer of Rokfin, Martin Floreani, as he answered the important question regarding the factors controlling bitcoin’s price stating:
“People make decisions emotionally and justify logically. Most people buying right now have FOMO from the last bull run. And the people who stuck around through the bear market certainly aren’t looking to sell now.. This creates some upward momentum on the price. Right now its a lot of speculation, but long-term I think bitcoin will prove a store of value better than gold.”
Whenever the price of bitcoin rises up, it gains a significant amount of investor attention from around the globe, but most of the people who try to bandwagon on the upward price tick want to make a quick buck in the shortest time possible.
FOMO gains its ground because there is no physical backing of bitcoin that keeps its price stable and instead, the entire value of the digital asset is purely based on speculation.
It has been just over a decade since bitcoin rose on the global financial scene as the replacement to the debt-based banking system. It is based on the revolutionary but nascent technology of blockchain, but just like every else based on technological innovation, time is needed for bitcoin and blockchain to get mature. The FOMO that builds up also derives inspiration from the fact that this space is relatively new.
With the amount of capital that is flowing in, the entire crypto arena is developing at a very rapid pace. People who trust the technology truly believe that bitcoin will be worth much more in the future as it is still going through its evolutionary phase just like any other invention of the world. As stated by the bitcoin permabull John McAfee:
I don’t care if it’s a penny today, it’s going to be 2 million dollars very soon…What’s happening in the market has nothing to do with the reality of its value.
Speculation is the thing that keeps the bitcoin’s price floating. Bitcoin is essentially a decentralized and peer-to-peer digital currency that has no existence in the physical world and it is all internet-based. Its price is thus dependent on speculation, that is people believing that the asset is worth something and will be worth something in the future.
Lack of physical backing is the major reason why erratic rises and falls are often observed in bitcoin’s price. One day the asset is shooting up and the very next day it is down on its knees. The entire space is too uncertain and volatile but this uncertainty is exactly the reason why a lot of the investor step into this area and this is where FOMO plays its role.
When the bull-run of 2017 took place, people who stepped in at just the right moment and cashed out, gained a lot of profit. When bitcoin’s price started rising initially back in 2017, people started buying it. When the assets price hit a peak in December, people who had stepped in timely gained huge benefits. The FOMO played its role in bringing the price up by building people expectation and bringing in investment.
Now whenever a bull-run is expected in the market, people step into the bitcoin world with the fear of missing out on an opportunity to raise quick money. The “FOMO” thus created with the expectation of a bull-run attracts more and more investors in this space and the price of bitcoin sees a further uptick as a result of the simple supply and demand mechanism. This is how FOMO plays its role to boost the digital asset’s price. As there is no physical backing, it is also a major factor in controlling bitcoin’s price.
As pointed out by Martin, the emotional drive of bitcoin proponents is very strong for the asset. People who believe in the technology lying underneath and dismiss the centuries-old system of banking have an emotional association with the asset. Thus, their trust in the asset is unshakable regardless of the price and the lack of physical backing.
But, the new investors stepping in mostly make decisions based on the FOMO and speculation rather than by logic. This is exactly the kind of uncertain and volatile situation that defines bitcoin price and makes it prone to the FOMO that infiltrates the general public’s mind whenever the expectation for a bull-run start to float around in the media.