Dogecoin FOMO and FUD: the story of the ultimate crypto rally

With a new crypto rally seemingly under way since the start of August, smaller altcoins can occasionally make some truly wild moves. First they shoot up incredibly fast on FOMO, then they fall even faster on FUD. But what is the ultimate example of this exaggeration, and why does it happen?

FOMO and FUD

FOMO (fear of missing out) is an emotion that makes you buy a cryptocurrency in a hurry. The price of an obscure cryptocurrency shoots up, everyone is talking about it, other people’s gains become unbearable to watch, and eventually you click to buy in too. But you are too late, the price is already far too high, and the many others on social media are simply far too enthusiastic.

FUD (fear, uncertainty and doubt) is the mirror image on the selling side, fuelled by rumours, alarming headlines or self-interested campaigns on social media.

In both cases the decision does not come from your own analysis, but from the crowd you are swept along with.

Dogecoin

The best-known example of FOMO and FUD remains Dogecoin’s incredible run in 2021. In early May of that year, Dogecoin rose by around 41% in just 24 hours and reached a record price of about $0.89, driven by the euphoria surrounding Elon Musk’s appearance on the television show Saturday Night Live.

On the evening of 8 May, however, Dogecoin’s price dropped by around 30% after Musk appeared on the show. Buyers who had got in at the peak were not amused.

Four days later the same thing happened, only in the opposite direction. On 12 May, Tesla suspended bitcoin payments over environmental concerns, after which nearly $365 billion in value disappeared from the crypto market. FOMO during the rise, FUD during the fall, all caused by one man and two announcements.

A masterclass in market psychology.