What is FUD? The Impact of FUD in the Crypto Market
FUD is a term that anyone involved in the crypto market has seen and even experienced at least once. Moreover, FUD can directly influence the investment decisions of traders and cryptocurrency investors.
So, what is FUD in crypto? What is the mentality of someone experiencing FUD? How does it impact the cryptocurrency market? What are ways to avoid falling into the FUD syndrome when participating in crypto?
I. What is FUD?
FUD stands for Fear, Uncertainty, and Doubt, referring to the fear, uncertainty, and doubt many people feel when there is bad news about a project, individual, organization, etc., spread from unidentified sources.
In the crypto market, FUD occurs when people spread negative, misleading, or exaggerated news about an asset, project, or platform with the intention of causing panic among investors, often referred to as FUD news, FUD coin, FUD crypto, etc. This leads to the asset or project’s token being rapidly sold off and its price plummeting.
Besides FUD, FOMO (Fear Of Missing Out) is also a common psychological effect, and depending on the severity and the party affected by FOMO, it can significantly impact the cryptocurrency market.
II. SYMPTOMS OF EXPERIENCE FOMO – FUD SYNDROME
Typically, those affected by FUD syndrome are inexperienced traders or investors in the crypto market. They often exhibit behaviors such as:
- Feeling fearful of the spreading bad news, leading to hasty decision-making without proper research and verification of accurate sources.
- Being impatient in trading, constantly checking orders and open trading positions.
- Lacking a plan or strategy before investing or trading.
- Trading based on news but not updating the market quickly enough, or lacking a comprehensive overview of the news.
Being easily swayed and not steadfast in their opinions due to a lack of technical and fundamental analysis skills.
For example: Trader A bought token B and is waiting for its price to increase to sell. A few days later, there’s false news that token B will be delisted from the exchange, accompanied by a fake announcement photo from the exchange. This can cause panic in Trader A.
Immediately, A checks various crypto communities on Telegram and sees this news being widely discussed. At this point, A may easily fall into a state of fear, thinking that if token B is really delisted, there’s a high chance of losing money.
Then, Trader A’s mentality focuses on preserving their assets by selling token B at the least possible loss. And when many people think similarly, the lack of buying interest and high selling pressure can lead to a significant drop in the price of token B.
- In the above case:
- Token B is the party affected by FUD.
Trader A is experiencing FUD syndrome.
III. Who Creates FUD in Crypto?
FUD is often a strategy employed by organizations and influential individuals (KOLs) in the crypto market to serve their interests.
Social media platforms have become a powerful tool for projects to communicate and provide information to their communities. However, they are also fertile ground for the rapid spread of FUD.
Accordingly, those creating FUD use social media or media outlets to spread misinformation about a project, such as government regulations, losing peg, scam projects, rug pulls, etc. The most common goal is to drive down the price of a token to accumulate it, i.e., buy as much of the token as possible. Then, they use their tactics to trigger FOMO in the community and take profits.
However, sometimes FUD against a coin, project, or team can severely impact the target, causing significant damage, or even making recovery in the crypto market impossible.
Or, more simply, some individuals or organizations create FUD due to personal grudges to negatively affect a project or token they are targeting.
IV. Consequences caused by FOMO – FUD
For the project, FUD can cause their token to drop sharply due to the imbalance between supply and demand. Furthermore, some smaller projects may collapse entirely if they do not have an appropriate resolution to vindicate themselves and lose investors’ trust.
For the community of investors and traders, FUD can cause strong emotional and psychological fluctuations due to fear and doubt, leading to hasty and ill-considered decisions. The consequence is that their assets gradually decrease over time after each FUD experience.
Moreover, FUD can make investors and traders lose confidence in their own judgment and the cryptocurrency market as a whole, as they have been “deceived” and suffered losses. This can lead them to have a negative view of crypto and leave the market. Therefore, FUD is one of the barriers to crypto’s path towards mass adoption.
V. 6 Ways to Avoid FUD Mentality When Investing in Crypto
Equip yourself with knowledge and conduct thorough fundamental and technical analysis to make accurate assessments and evaluations of a project or asset. This helps investors and traders identify solid investment opportunities and develop a long-term vision, thereby combating the fear and uncertainty in the short term caused by FUD.
Always have a trading plan before placing an order. You must have a stop loss point, an entry point, a target point, a capital allocation plan, etc., before trading.
Evaluate risks to compare the risk-reward ratio when making decisions.
Be steadfast in your strategy, but also combine this with observing market sentiment to assess risks and make flexible, reasonable adjustments.
Stay calm in the face of FUD and take time to do your own research (DYOR – Do Your Own Research), learning from authoritative sources. This will help investors and traders distinguish between misleading and exaggerated information, thereby avoiding the impact of FUD.
Limit making investment or trading decisions based on a single piece of news or event.
