Key Takeaways
- A case study from Lookonchain shows a trader consistently bought Wrapped Bitcoin (WBTC) at peak prices and panic-sold during downturns, resulting in massive losses.
- The crypto market’s volatility often triggers emotional responses, leading to impulsive decisions.
- FOMO buyers and panic sellers contribute to market instability and can incur substantial financial losses.
According to blockchain analytics platform Lookonchain, they noticed that a certain trader fell into a pattern of buying Wrapped Bitcoin (WBTC) at higher prices and then selling it at a loss when the price dropped.
Lookonchain Data
Since April 1st, the trader has made six WBTC purchases, continuing to buy at peaks and then selling impulsively when the price drops.
Upon looking up the trader’s wallet, it appears that he/she has a large amount of holdings, potentially qualifying the trader as a whale. The trader’s holdings show over $7 million spread across 18 EVM networks, with most funds locked in Aave Ethereum Wrapped Bitcoin (aEthWBTC).
The wallet’s tenure and engagement across multiple blockchain networks indicate the trader is likely experienced in the crypto space, as the initial transaction within the wallet dates back 1,164 days, equivalent to more than three years ago.
On-Chain Activity
However, as per Etherscan’s on-chain analysis of the trader’s wallet, there appears to be minimal activity despite the massive balance. It is worth noting that in May 2023, the trader only executed a single transaction throughout the month.
Furthermore, between March 2023 and April 2024, the maximum number of transactions the trader has completed in a single day is only 12, leading to conjectures that he/she may be inexperienced.
Fear Of Missing Out (FOMO)
Driven by FOMO, the trader chased WBTC at inflated prices, only to panic and sell at a loss when the market dipped. While this behavior is more common among newbies entering the crypto space, even experienced traders can be swayed by FOMO and panic selling in a volatile market.
Signs Of FOMO
Several unmistakable indicators can validate if you are engaging in FOMO trading or investing:
- Impulsive purchases
- Chasing trends
- You don’t have a trading plan
- Anxiety and restlessness
- Excitement and euphoria
- Envy and jealousy
Final Thoughts
This case study shows how FOMO can lead to poor investment decisions. It should serve as a guide for investors to keep their emotions in check when trading or investing. Remember to focus on your long-term plan, prioritize research over hype, and not let FOMO cloud your judgment.
