What Are FUDs and How to See Through Them

What Does FUD Mean?

Wherever FUDs are present, the market is going through a state of fear, and investors are considering making changes in their investments, like cashing out their crypto. FUD is used widely in the crypto market and is sometimes used as an attempt to manipulate a token’s price or the entire crypto market in general. 

FUD in Crypto

FUDs tend to incentivise users to cash out their crypto and panic sell their assets. Headlines like “I was a millionaire then lost everything as the crypto market crashed” are excellent examples of what manipulative FUDs look like. They’re true to some extent, but they are usually focused on the worst-case possible rather than the present reality.

FUD in NFT

The Crypto market has a lot of FUD around it since it’s a pretty new technology and still has room to unravel its potential and get mass adoption.

However, NFTs are much newer and have more of an avant-garde concept. So, same as crypto, they’ve attracted a lot of FUD around them. FUD in NFT can refer to headlines that either refers to

• all NFTs as scams, or
• a specific project as a scam.

FUD in Stock

FUD in stocks refers to concerns around a certain stock and is typically targeted towards vulnerable, novice investors. FUD in stock usually tends to be a piece of disinformation and fake news with no factual backing and usually originates from social media hype.

What Is FUDster?

A FUDster is an individual, group or organisation that spreads FUDs purposefully. Their intention to spread FUDs could be for personal gains, manipulating the market, financial or political gains, a form of competition, or simply for amusement!

Cryptocurrency FUD Examples

Some common FUD examples are:

• Bitcoin is used by drug dealers and criminals.
• Crypto is too volatile to be used as a form of currency.
• Bitcoin and other PoW cryptos are bad for the environment.
• Tokens can be easily lost.
• Bitcoin’s network is too slow.
• Bitcoin is not a real currency (since it isn’t a tangible asset).

What Causes FUD In Crypto?

FUDs in crypto usually occur as a result of one of these three:

• Government regulations,
• Announcements from influential people, and
• Sudden changes in crypto prices.

Let’s elaborate on each one and get into details.

Government Regulations

Cryptocurrency is still considered a new concept, and the crypto markets are still in their infancy. Many countries haven’t settled on a unified approach to these assets.

• Japan is very supportive of crypto.
• The US seeks to regulate and tax cryptocurrencies.
• El Salvador uses Bitcoin as a form of currency.
• Russia disapproved of it and is slightly getting more open to the concept now.
• Ecuador has completely banned Bitcoin transactions.

News about a country banning Bitcoin obviously won’t have much positive impact on the market. It incentivises existing investors to cash out their assets and scares off other investors considering making crypto investments.

These will result in a market size reduction and decrease the market’s ability to recover from the announcements. Typically, news from another nation banning or regulating crypto assets tends to be considered FUDs. 

China made an announcement in September 2017 about banning ICOs. As a result, Bitcoin had a 20% decrease in price and dropped from $4,500 to around $3,600 from the FUD.

Announcements From Influential People

When prominent individuals make announcements against crypto assets, it can create a significant amount of FUD, especially if the individual is highly looked-upon in the finance industry.

Warren Buffet is a well-known investor who has spoken out against Bitcoin to the point he became a meme in the crypto community. Other famous crypto invalidators include CEO of Bank of America Brian Moynihan and former Chairman of the US Federal Reserve Ben Bernanke.

However, some individuals used to create FUD around cryptocurrencies and have changed their minds now. An example of such people is the CEO of JP Morgan Chase, Jamie Dimon. He is famous for the following statement:

“Bitcoin is a fraud that will ultimately blow up, and it is only suited for use by drug dealers, murderers, and people living in North Korea.“

After these statements, Bitcoin’s price dropped by 6%. Although he has reversed his take on Bitcoin and announced he regrets calling Bitcoin a fraud and states, “The blockchain is real. You can have crypto dollars in Yen and stuff like that.” 

But it still hasn’t reversed the FUD he created around cryptocurrencies!

Sudden Changes in Crypto Prices

In most cases, sudden crypto price drops happen due to FUDs, but price drops can also create FUDs. The crypto market is still in its infancy and is vulnerable to sudden market changes that no one is prepared for.

The bear market can cause investors to panic and sell their crypto so they won’t lose any more money. However, the market usually recovers from the state within weeks, and the prices start going up again eventually.

These sudden crypto crashes are oftentimes temporary, and the market tends to recover in a few weeks or months and even reach new All-Time Highs after the recovery. However, these sudden price drops result in many investors panic-selling their assets at a very low price and not making any profits.

Impact of FUD on Users

Fear-based strategies (Fear, Uncertainty, Doubt, and Fear of Missing Out) are emotional manipulation tactics and allow the manipulator to achieve a specific goal, i.e., influencing the market.

To understand what FUD is and what it is not, you need to know how the strategy works. Fear-based propaganda and statements try to provoke a false sense of security:

“If you do this, your safety is guaranteed”. 

FUD Impact on the Price

FUD sends a negative signal that something is not right in the market or that a significant number of people are quitting the crypto market. 

• China’s ICO ban signalled that Chinese citizens would be selling their crypto assets because of the new regulation laws, resulting in a 20% drop in Bitcoin’s price within a short period.
• Jamie Dimon’s statement sent a signal that something was wrong with the market. With his level of influence in the finance industry, many people second-guessed their investment decisions and began selling their crypto.

How to Deal with FUD?

FUD can be extremely overwhelming at times, and it’s absolutely normal to feel those emotions, especially when your hard-earned money is in danger. Here are some tips and strategies to use at times of FUD so you can avoid panic selling your assets and losing money.

• A financial advisor can clear the fog in your head and guide you through more cool-headed decisions.
• Have an emergency fund to cover you in times of sudden hardships.
• Specify your risk tolerance before making investment decisions and use risk management strategies.
• Spread the money across a variety of asset types (AKA diversification).
• Review your original intention of investments.
• Reevaluate your approach to investing and investment strategies
• HODL!

Summary

FUD stands for Fear, Uncertainty, and Doubt and refers to headlines, announcements or news that can lead to irrational investment decisions like panic selling. FUDsters tend to create FUDs to achieve specific purposes. FUDs can make a coin or token’s price drop quickly as investors cash out their assets out of fear. However, it usually has short-term effects, and the prices rise back up and sometimes even reach new All-Time Highs.

FAQ

Now that we know all about FUD in crypto, it’s time to answer some FAQs.

How Do You Identify FUD?

FUDs in crypto tend to have similar formats. Typically, any social media hype aimed at bringing a negative perspective towards the crypto market without having any factual backing tends to be nothing more than FUDs.

How Do You Overcome FUD?

Having a critical mindset makes you easily spot the FUDs whenever you see one, and the more you see, the easier you’ll notice.

If you notice a headline is making you question your life decisions, take a step back, remind yourself that no investment is made without a bit of risk, and revise your investment thesis. Also, having an emergency fund will bring much more peace to your mind in times of FUDs.