Lily R.
Lily R.
Dec 07, 2021

What Are FUDs and How to See Through Them

tl;drFUD stands for Fear, Uncertainty and Doubt and is a strategy used to emotionally manipulate people into making or not making a particular decision. In case of cryptocurrencies, FUDsters usually manipulate people to sell their holdings. One way to avoid this is to DYOR by looking up either the coins’ social media or communities where people discuss cryptocurrencies. Another way to avoid FUDs is to look out for rug pulls. Rug pulls happen when a team member of a coin or token runs away with the investors’ fundings.
What Are FUDs and How to See Through Them
What Are FUDs and How to See Through Them
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Introduction

FUD stands for Fear, Uncertainty and Doubt and is a propaganda strategy used in crypto news, stock markets, politics, and even cults. Users of FUD aim to emotionally manipulate people into making or not making a particular decision. In the case of cryptocurrencies, FUDsters usually manipulate people to sell their holdings.

Headlines like “I was a millionaire then lost everything as the crypto market crashed” are excellent examples of what FUD looks like. They’re true to some extent; however, they are usually focused on the worst-case possible rather than the present reality. To avoid being manipulated by FUD, you should DYOR and base your financial decisions on what you believe the market is up to.

Don’t Blame us Writers!

It doesn’t necessarily mean the writers are trying to impact the market, though. It is more because writers are incentivized to write such titles since they get more clicks and views than other writing formats. 

FOMO: Another Fear-Based Strategy

On the other end of the spectrum, there is FOMO. It stands for Fear of Missing Out, which is just as illogical as FUDs. Tweets and posts saying “Bitcoin will reach a million next year” or “SHIB will reach $1 in a month” are good examples of FOMO. 

The Keys of Removing Emotion From Decisions

First and foremost: DYOR (Do Your Own Research): Social media is a great platform to look for extra information - either the coins’ social media or communities where people discuss cryptocurrencies. Discord, Telegram groups, and Reddit are the best places to look for this information. See what people have to say about a certain situation or event. Keep yourself updated on a project to see their improvements or how they’re facing a recent issue. 

Rug Pulls

Rug pulls happen when a team member of a coin or token runs away with the investors’ fundings. There are many ways to watch for to avoid rug pulls:

  • Liquidity is Not Locked

Sometimes Developers will lock up their liquidity with a third party to ensure that they can’t pull out that liquidity even if they want to. This proves that the project is legitimate and is a clear sign that the project will not get rug-pulled. But the price can still be manipulated in other ways. 

  • Large Percentage of Tokens is Stored in Few Wallets

You can actually use blockchain scanners like Etherscan or Bscscan to see which wallet holds the largest amount of a token and how much it holds. If there are around ten wallets that contain a large amount of all tokens, it is possible that the developer or the team members bought those tokens at a low price during the initial launch. If that’s not the case, you should still watch out for these whales. If they sell even as little as 2% of all the tokens at once, it will dramatically crash the price due to AMM algorithms.

  • Hiding Whales With Burn Wallets

Developers who plan to perform a rug pull create many tokens and burn a large majority of those. You can see the list of wallets on blockchain explorers and see how much of the token a wallet holds. Burning is the process of sending tokens to a wallet address that no one has control of and can’t access it. If there are 1000 tokens and 900 of them are burned, only 100 is left, and if one wallet holds 10 of those tokens, the blockchain explorer shows that they own 1% of the entire supply. In reality, they own 10% of the whole supply and are considered a whale.

  • No Audits

Audits done by third parties like Certik are worth checking out. Projects with multiple audits by different trusted sources have a blazing green light. On the other hand, projects with no audits are enormous red flags.

  • No Activity on Social Media

Another wake-up call is that the project does not have any social media or a functioning website. Almost anyone can easily make a token and upload some posts on one social media to get exposure. However, it takes a lot more time to make distinguished social media pages and websites.

  • No Multi-Signature Wallets

A Multi-Signature wallet is a wallet that requires multiple passwords from multiple people to have access to it. It is meant to decrease the risk of stealing from the wallet. However, the only way to check if the developers have such a wallet is to go through their posts on social media or websites.

Author’s tip: Fear-based strategies (Fear, Uncertainty, Doubt, and Fear of Missing Out) are made for emotional manipulation so that the manipulator can achieve a specific goal. This isn’t only present in the cryptocurrency industry, though. In order to understand what is FUD and what is not, you need to know how the strategy works. Fear-based propaganda, statements, etc., are trying to provoke a false sense of security: “If you do this, your safety is guaranteed”. Having a critical mindset and questioning every aspect of the project can lead to life-changing investment decisions. What we provide at Cryptologi.st is for educational purposes only, and not by any means are we financial advisors. We sincerely believe that awareness is the key to successful investments.

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