Crypto FUD is a term that stands for “Fear Uncertainty and Doubt”.
In most cases, it is used as a defamatory term to dismiss the seemingly unending waves of negative news and criticisms about crypto that are mostly designed to scare away investors or sabotage a crypto project.
For example, you will hear mainstream media sources talking about the “Bitcoin Bubble” whenever prices fluctuate wildly one way or another. While established cryptocurrencies like Bitcoin can recover from FUD, it can be crippling to new coins even though there are ways to combat it with marketing, social media strategy, and old-fashioned word of mouth.
As cryptocurrencies become increasingly popular with increasing market capitalization for nearly every new project that emerges, they also grow increasingly volatile. Therefore, it is normal to see investors have fear of losing money or uncertainty about the future of the market as a whole.
However, not all FUD events are the same. In some cases, the FUD is usually warning of loopholes in a crypto project that investors and traders need to beware of.
In this short guide, we explore what crypto FUD means for investors, traders, and newcomers alike and its long-term effects on the cryptocurrency market.
What Does FUD mean?
As mentioned earlier, the term FUD is a popular pejorative catchphrase that is often thrown around crypto circles. In most cases, a ‘FUDster’ will be the person who uses disinformation or manipulated facts to create doubt and leverage an investment position against other traders.
In casual conversation, it usually means to be scared of cryptocurrency volatility and the possibility of a project’s value falling to zero. However, FUD can have a more dangerous connotation in the cryptocurrency space.
For instance, FUD has been used as an effective marketing strategy for some projects or individuals with malicious intent who are trying to sabotage another coin’s community by scaring their supporters away.
So how does this work exactly? Well, let’s take a look at some examples.
What Are Examples of FUD in the Crypto Markets?
One of the most infamous examples occurred at the tail end of 2017 when bitcoin’s price peaked at nearly $20,000 per coin.
However, as soon as it touched $19,500 a wave of FUD so strong hit the markets crashing Bitcoin’s price from its peak prices to lows of nearly $6k per coin within days.
Some attributed this sudden crash to regulators in the US imposing huge capital gains on Bitcoin holders and others blamed it on the introduction of Bitcoin futures trading that gave way to market manipulation.
Recent examples of FUD in the crypto market include Elon Musk’s tweet about Bitcoin’s energy consumption which was coupled with the news of China’s ban on crypto trading and crypto mining in its country.
With more than 50 percent of Bitcoin’s mining rigs located in China, the news about China’s ban brought about FUD in the market.
Elon Musk’s previous endorsement of Bitcoin also brought with it excitement in the crypto market but later turned to FUD with a tweet from the CEO about Tesla’s move to no longer accept bitcoin due to the network’s excessive energy consumption.
Both events sent bitcoin dropping by nearly 50% from its previous high of $60,000. But in both cases the price of Bitcoin would later recover, which meant everyone who sold because of FUD missed out on serious value.
What's the Difference Between FUD and Legitimate Concerns?
Much of the confusion in this regard has to do with separating FUD from actual market concerns. For example, legitimate concerns would be talking about bitcoin’s scalability issues and how it impacts transaction fees.
A lot of investors consider these market concerns over factors that could prevent bitcoin from becoming a mainstream form of payment on the Internet. While real concerns are based on valid points, FUD utilizes illegitimate concerns that are often only intended to affect the price of cryptocurrencies.
Most of the FUD in crypto is used in marketing campaigns and spread by individuals with malicious intent who use it as a way to manipulate an investment position against other traders. This can be devastating especially for smaller coin prices because it causes investors to quickly pull out of their positions which then drives down the price even further.
What Should You Do When FUD Rears its Ugly Head?
As a new investor in the cryptocurrency market, you need to understand that no one is immune from FUD, and learning how to navigate through it is an important part of being a ‘good’ trader and investor.
First and foremost, it’s important to remember that you should never panic sell simply because of ‘negative’ news that generates FUD. Before panicking, remember to do your due diligence and gather information from various sources as you look at the news objectively. This will help you recognize red flags when they appear to prevent a potential attack on your investments.
What Are the Long-Term Effects of FUD?
While FUD can be damaging in the short term, volatile price swings and sudden market corrections are a critical part of a healthy crypto market. In most cases, the FUD dies out and the market resumes its normal trajectory.
Bitcoin for instance has had naysayers declare it dead more than 400 times yet it continues to grow at a breathtaking pace. What’s more, since the May FUD, Bitcoin has resumed to its $60,000 previous all-time high.
Is it a Good Strategy to Buy When There's a Lot of FUD?
While it is true that FUD brings a ton of negative attention to a cryptocurrency, in some cases, buying during times of negative news and rampant fear in the market can be beneficial.
This can give you a decent entry position. However, it is important to note that some FUD news and events can be devastating to a cryptocurrency leading to prices falling by 80% or more. So, it is important to keep in mind that not all FUDs are created equal and strategies should be implemented accordingly.
Does FUD Exist in Traditional Finance Like the Stock Market?
Yes, there is FUD in traditional finance.
The main difference between traditional finance and crypto is that FUD in the stock market can theoretically be more easily detected, and its impact is significantly reduced thanks to the regulatory bodies that oversee the markets.
