Crypto 101: What Can FUD Do to Your Investment?
For fear, uncertainty, and doubt (FUD), there is an overarching belief that a particular asset or market will fail. The phrase “FUD” is sometimes used to describe information or events that have been exaggerated or made up (as in, “Don’t listen to that, it’s just more FUD”).
FUD is one of several stock jargon concepts to be familiar with, but it can be used in any asset class. In the crypto sphere, this term has a unique connotation. Throughout the years, Bitcoin and other cryptocurrencies have been subjected to a significant level of skepticism, and it continues to do so today.
What Does It Mean?
FUD-based investment methods are often discouraged. While some FUD may be justifiable, the phrase often indicates irrational market negativity.
FUD may be compared to FOMO, which is the fear of missing out. Unlike FOMO, FUD is a combined effect that spreads like wildfire through social media. It has a more significant impact on the individual’s desire to avoid missing out on possible advantages.
FOMO trading is more common when markets rise, whereas FUD trading is more common when markets fall. In a nutshell, FUD stands for dread, while FOMO stands for fear of missing out.
In some instances, the two may serve as counter-indicators. To put it another way, when there is a lot of fear and uncertainty in the market, savvy investors may be purchasing assets at lower prices, and when there is a lot of FOMO, seasoned traders may be selling at a higher price.
The word “hodl” is used by crypto traders as a countermeasure against FUD. “Hold on for dear life” means “hodl.” While ranting about their inability to time the market and several instances of the word “hold” being misspelled, someone came up with the name Hodl. First used regarding Bitcoin, the word now encompasses a wide range of cryptocurrencies.
Of course, one of the main ways many crypto investors override FUD is by building a diverse portfolio to weather any crypto storm. To follow their example, most digital finance experts recommend using a platform like Binance, Coinbase, or Bitcoin Profit, which offers the chance to invest in more than 30 different forms of cryptocurrency.
When Does FUD Happen?
When prices fall, or a significant event occurs that is commonly believed to be bearish, FUD might arise. It’s possible that a firm will fall short of analysts’ profit estimates or that a well-known investor has taken a short position in the stock.
FUD may also arise from a more widespread cause, such as a pandemic, a natural catastrophe, or the possibility of a government failing on its financial obligations.
In general, the more disastrous and unclear something may be, the more likely it is that it would be the topic of fear-mongering.
It’s not uncommon for the stock market to respond quickly to this news. Most of the time, misinformation is spread by taking facts out of context or embellishing them beyond recognition.
It is illegal to propagate FUD to depress stock prices in regulated securities. Regulatory bodies like the SEC, FINRA, or FINCEN might take legal action against people who engage in such practices.
Some regulatory organizations have yet to categorize all cryptocurrencies as securities, so there is still much room for interpretation.
FUD has grown around the possibility that many altcoins might be classified as securities in the future, owing to the significant effect this would have on the current legal framework for cryptocurrencies.
FUD Example
One of the most exemplary instances of crypto FUD is China banning Bitcoin, which has spawned more memes and Twitter rants than any other.
When it comes to China’s alleged ban on Bitcoin, it seems to happen every year and numerous times. In the case of a full-scale “Bitcoin prohibition,” it would be an isolated incident.
According to the Chinese media, the Chinese government has imposed some form of restriction on persons or organizations operating in the crypto markets, which is then reported as a “Bitcoin ban.”
In 2021, China banned the mining of Bitcoin. Even yet, the market was able to go on.
Final Thoughts
Many crypto phrases are almost as ancient as Bitcoin itself, including FUD. After persuading holders to sell, individuals that propagate FUD are likely to intend to acquire at lower prices.
FUD may originate from almost any source and be directed at virtually any topic. In other cases, content producers have converted FUD into a marketing strategy: They create YouTube videos or blog articles that elicit anxiety in their audience.
Finally, the designers offer something that seems to ease that anxiety. The solution provider has created a product or service that may be purchased.