Don't be caught off guard by the resurgence of cryptocurrency prices. Bitcoin, the leading coin, has seen a remarkable 131% increase this year, largely due to investors' expectations of a more favorable regulatory climate under the incoming Presidential administration. Smaller digital tokens have also soared, with dogecoin up by 296%. However, it's important to note that cryptocurrency prices, especially for smaller coins, are driven mainly by investor speculation rather than fundamental factors like corporate earnings. This makes them highly volatile assets.

Mastering Crypto FOMO for a Stable Portfolio

Step 1: Acknowledge Your Emotions

In the world of cryptocurrency, it's easy to be swayed by social media posts and the allure of quick gains. But the first step in controlling FOMO is to recognize these temptations. We're only human, and it's natural to feel curious or excited about a new investment. By acknowledging these feelings, we can better manage our emotions and make more rational decisions. For example, when you see others making huge profits trading cryptocurrencies based on memes, it's important to take a step back and assess your own emotions. Are you truly interested in the long-term potential of the asset, or are you just caught up in the excitement?

Step 2: Differentiate Between Investing and Speculating

When it comes to traditional investments like stocks, due diligence is crucial. You would examine a company's earnings, debt levels, and other fundamental factors before making a purchase. But with cryptocurrencies, it's often difficult for average investors to justify their ownership beyond the hope of price appreciation. The lack of underlying fundamentals makes these assets more risky. For instance, consider the case of Haliey Welch's "Hawk Tuah" themed crypto. Many investors rushed in without fully understanding the risks, only to suffer significant losses. By clearly distinguishing between investing and speculating, investors can avoid making impulsive decisions based solely on price movements.

Step 3: Determine a Realistic Position

Once you realize you're engaging in speculation, it's time to think about how much you're willing to risk. Are you really prepared to put your inheritance or entire paycheck into a cryptocurrency that could go to zero just as quickly as it could make you rich? Probably not. It's important to set a limit and have a clear understanding of what you can afford to lose. Maybe having a small percentage of your wealth invested in cryptocurrencies, such as single digits, makes sense. This way, if the investment performs well, it can add value to your portfolio, but if it fails, it won't derail your overall financial plans. By finding a realistic position, investors can balance the excitement of cryptocurrency trading with the need for financial stability.Plus, sign up for CNBC Make It's newsletter to get tips and tricks for success at work, with money and in life.