Behavioral finance expert advises against letting crypto FOMO lead to impulsive actions despite Bitcoin's 131% increase this year.

Don't look now, but cryptocurrency prices are surging again.

The largest and most popular cryptocurrency, Bitcoin, has experienced a 131% increase in value this year due to investors' belief that the new Presidential administration will promote a more favorable regulatory climate for crypto.

This year, traders have increased the value of dogecoin by 296% due to the anticipation of the Department of Government Efficiency's creation.

According to market experts, cryptocurrency prices, particularly for smaller coins, are highly volatile due to investor speculation rather than fundamental factors, like corporate earnings impacting stock prices.

It's easy to experience "regret aversion" when observing individuals on the internet becoming wealthy through trading a cryptocurrency based on a shiba inu meme, and feeling that if you don't act quickly, you will regret not taking advantage of the opportunity.

If not managed properly, the fear of missing out (FOMO) could negatively impact your investment portfolio, according to Amos Nadler, founder of Prof of Wall Street and a Ph.D. in behavioral finance and neuroeconomics.

It's better to feel bad than to let FOMO drive you to make a hasty decision.

Here's how to keep your crypto investing FOMO in check.

How to keep investing FOMO from derailing your portfolio

Nadler explains that people may experience FOMO when it comes to any exciting investment, but crypto's potential for enormous short-term gains and internet appeal can make it particularly enticing to curious investors. Additionally, crypto trading promises the possibility of wealth without the tedious spreadsheet work associated with traditional asset trading, such as stocks.

"The allure of investing in cryptocurrency lies in its perceived simplicity compared to considering macroeconomic factors, interest rates, earnings, and M&A transactions, which are often viewed as tedious and uninteresting," he remarks. "With cryptocurrency, we can easily invest our money and achieve wealth."

When dealing with a highly volatile asset, thinking that it's safe can be dangerous. Just look at the recent losses of those who bought Haliey Welch's "Hawk Tuah" themed crypto.

Consider the following framework to make informed decisions around your more speculative trades, rather than emotionally-driven ones, says Nadler.

Step 1: Acknowledge your feelings

To avoid making risky trades, you should avoid social media posts and be honest with yourself about your emotions when encountering tempting investments.

"Nadler advises acknowledging one's excitement about something, as it is a natural human emotion."

Step 2: Are you investing or speculating?

Due diligence is necessary when making a long-term investment, such as buying a stock, to examine the company's underlying fundamentals, including earnings and debt levels.

Nadler argues that while anyone can easily buy a cryptocurrency online, it is challenging for average investors to determine a compelling reason to own a specific cryptocurrency other than the hope that it will increase in value. In his view, the primary driving force behind investment decisions is the price of the asset.

If you put yourself at risk of incurring major losses, he says, you are putting yourself at risk.

Step 3: Find a realistic position

What is the risk you're willing to take on an investment that could potentially make you wealthy or result in a loss?

Nadler questions whether he should use his inheritance or entire paycheck to invest in this thing.

If you don't want to feel silly if the thing goes to the moon, it might make sense to have a little something on it, he suggests. Perhaps even a little more than a token amount - something that will benefit your portfolio if it succeeds, but won't disrupt your plans if it fails.

Nadler suggests that if you want to allocate a portion of your wealth for play, keep it small and in single digits, rather than using your entire inheritance or paycheck.

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