Measuring the behavioural costs of FoMO in cryptocurrency markets

This thesis investigates the financial impact of the Fear of Missing Out (FoMO) phenomenon on cryptocurrency investment performance. The aim of the study was to quantify the potential behavioural costs of FoMO-driven trading decisions, compared to a passive buy-and-hold strategy. The research was conducted by using an empirical backtesting analysis based on the daily price and volume data for seven major cryptocurrencies between January 2018 and October 2025. The simulation approximated FoMO-driven investor behaviour by entering positions when increased trading volume occurred simultaneously with major short-term price increases. A stop-loss mechanism was also included to simulate the loss aversion of retail investors. The performance of the two strategies was evaluated through total cumulative returns, annualized volatility and the Sharpe ratio. The results indicate that the FoMO-driven strategy did not result in statistically significant financial underperformance or outperformance in total returns compared to the buy-and-hold benchmark. However, the study found a statistically significant reduction in average volatility across all examined market phases, including a bull and a bear period. These findings suggest that while FoMO-driven trading leads to individual asset-level performance deviations, the inefficiencies are not systematically market-wide.