Bitcoin recently hit another high, leaving some people feeling like they missed their chance to get a piece of the action. Some call it “crypto FOMO.” Steven Boyle/S.F. Chronicle from Getty Images elements

Bitcoin reached yet another new record high this month. On Aug. 14, the crypto asset hit just above $124,000.

It’s been a big month for the crypto asset. On Aug. 7, President Donald Trump issued an executive order that directed the Department of Labor and other agencies to reexamine its guidance on allowing “alternative assets” like cryptocurrency to be in 401(k) plans. On Aug. 9, Harvard announced its endowment had acquired 1.9 million shares, valued at $116.7 million, of a Bitcoin exchange-traded fund called iShares Bitcoin Trust.

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Like the S&P 500, Bitcoin and other emerging technology investments like AI keep hitting new highs in valuation. That’s made some investors very rich. And it’s left others feeling like they missed their chance to ride the rocket ship. It’s been called “crypto FOMO” — fear of missing out.

Analytics firm Glassnode noted in July that first-time buyers snatched up 140,000 Bitcoin in a two-week period in early July. Sam Bourgi, a finance analyst and researcher at Investors Observer, said that when prices rise quickly on these types of assets, it’s normal to see people jumping in for the first time.

“As soon as prices go up, people tend to ‘FOMO in,’ thinking that they’ve missed the boat,” he said.

Here’s what “crypto FOMO” looks like, how it happens, and what you can do about it.

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Behind Bitcoin’s rise and fall (and rise, and fall, and rise …)

Bitcoin has been around since January 2009. Since then, there have been high highs and low lows, including three separate years in which it’s fallen by more than 60%.

Bitcoin was initially pitched as a currency replacement — that you’d use it instead of dollars to buy pizza and pay rent. But now, it’s treated by ardent investors more like a digital form of gold, because it has a limited supply and a perceived intrinsic value its holders believe will continue to rise.

“You’re starting to see financial advisers recommend allocations to crypto. You’re starting to see endowments like Harvard buying crypto ETFs. You’re starting to see whole companies basically get created based on buying crypto for their treasuries,” said Sam Nofzinger, the GM of brokerage for investing platform Public.com. “I think, finally, we’ve de-risked crypto enough that you can probably say, hey, you know, this is not the wild, wild, wild West anymore.”

Not everyone is sold on crypto as the future of investing. Unlike buying traditional stocks, you aren’t investing in it because you believe in the solid business fundamentals.

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Another potential point of concern for the crypto-curious: Bourgi said we’ve seen Bitcoin value rise and fall in roughly four-year cycles, and we’re about a year off from the end of another one. In November 2022, the price slipped below $16,000.

“No one was buying back in 2022 when the market was in turmoil and Bitcoin was below $20,000. But once the market starts to rally, you start to see a lot of the FOMOs coming in,” Bourgi said. His prediction: “Next year is probably going to be a pretty volatile year for Bitcoin.”

Where crypto FOMO comes from

It’s tempting to think of investing and money management as purely rational pursuits. Dollars and cents, spreadsheets and statistics. Numbers don’t lie. How can you argue with math?

In reality, there are three primary emotions that we know drive people’s financial behavior, said Hersh Shefrin, a professor of finance at the Leavey School of Business at Santa Clara University. The first is fear. The second is hope, specifically for upside potential — the possibility of an asset increasing in value. And the third is aspiration: the desire to be successful and seen as a winner.

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“FOMO” stems from that first one, Shefrin said. People take into account both the fear of losing money and the fear of losing self-esteem in the form of social standing. And we experience the feeling of loss much more acutely than the feeling of gains of the same magnitude, he said. In other words: Losing $5,000 on a bad investment will sting a lot more than watching your portfolio rise $5,000 will make you feel joy.

But that second fear — loss of social standing — is just as powerful. Shefrin said a person can decide against a potential investment and feel confident about their choice to avoid potentially losing money. But if they go to a party that night, and every person they talk to is saying how they made that investment, and how much money they’re making, they very well may change their mind.

Losing social capital puts them in “the domain of loss,” Shefrin said. They are losing something as their status drops. That can sharply pivot a person’s risk analysis and make them decide potentially losing money in the future is still better than losing social capital now.

In a place like the Bay Area, the high cost of housing and the pinch of inflation may leave some people feeling like a quick return with a risky investment is their only chance to get ahead. And you’d be hard-pressed to find a party or networking mixer in San Francisco where someone isn’t talking up their crypto portfolio. It’s a potent mix of the financial pressure and social pressure that can push people to make an uncharacteristic investing decision.

“What we do when we’re feeling we’re already behind the eight-ball is we seek risk, even bad risks, Shefrin said. ‘We buy lottery tickets. We are willing to take something that will give us a chance to feel like winners instead of potential losers. Crypto is tailor-made for that, especially Bitcoin.’

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Social media influencers can be another source of FOMO inducement, said Xing Huang, an associate professor of finance at Cornell University who co-authored a paper about retail investor behavior on the Robinhood platform. Her work found that investors can be strongly influenced by what other investors are doing — “attention-induced trading.”

In every part of the social media universe, including but certainly not limited to crypto influencers, it’s all about projecting social status and making it look like you’re doing everything right. It can make it seem like you’re the only loser missing out on the fun and the funds.

“A lot of influencers will share this type of dramatic returns they get in their investment, and no one is sharing how much they really lost,” Huang said.

If it makes you feel any better, this isn’t the first time we’ve been in a white-hot market where everyone’s mired in FOMO. During the height of the dot-com boom in the late 1990s, Newsweek ran a cover with a worried-looking man drawn in Roy Lichtenstein’s dot-art style. The caption: “The whine of ‘99: Everyone’s getting rich but me!”

What your FOMO can teach you

So you’ve got crypto FOMO. Now what?

Meir Statman is a professor of finance at the Leavey School of Business at Santa Clara University who has co-published research with Shefrin, as well as the author of the book “A Wealth of Well-Being: A Holistic Approach to Behavioral Finance.” He said to think of this type of FOMO as “regret paired with hindsight.”

It’s not the same adrenaline-fueled fear you experience when, for instance, you narrowly avoid a car crash, or you see a snake on your path and you recoil. It’s more cognitive, more emotional. What we’re all seeking in our decisions, he said, is regret avoidance.

Look at your portfolio in totality, he said, and try not to focus on individual winners or losers. Every investor has some bets that pay off and some that don’t. People tend to attribute their losses to bad luck and their gains to skill, but when it comes to investing, he said, “it’s more like 97% luck and 3% skill.”

Also, keep in mind that, sure, you might have invested in Bitcoin before it got huge and made a ton of money — but you also might have invested in a hot-sounding asset that flopped. You’ve probably skipped more bad bets than good ones. And even the hot bets aren’t hot all the time. If you invested in Bitcoin at its recent height, you’ve already lost money: Bitcoin was trading at just over $111,000 as of Wednesday night.

Nofzinger of Public.com named some formerly popular investments that have, as he put it, lost their flavor: Pot stocks, 3D printing, solar companies, lithium. And for every Bitcoin that makes investors into millionaires, there are hundreds of thousands of digital assets like “meme coins” that go nowhere. Remember NFTs?

Persistent FOMO could be a sign that you want to dip your toe into crypto or AI investing. Regardless of what their boosters say, both are volatile, so don’t invest more than you can afford to lose.

A small amount in a diversified ETF will be a better hedge against risk than picking a single company, Nofzinger said.

“Just buying a little can make you feel really good, like you’re not missing out, but, it’s not going to dramatically alter your risk profile and cause you to go to the poorhouse, because you’ve sized this risk appropriately.”

A final recommendation from Statman: Think of all the different types of wealth in your life. Not every investment yields returns in dollars.