Following the cryptocurrency industry's early success in gaining traction among investors and traders, some slang has become popular among its supporters. One of them is "FUD." So, what does FUD mean in crypto, and how does it relate to investing in crypto?
What Does Fud Mean In Crypto?
The crypto acronym FUD stands for "fear, uncertainty, and doubt." It describes market participants' scepticism about cryptocurrencies and their long-term viability.
Fudding can mean many things in crypto. But first, let’s explore what FUD is. FUD is a term for psychological tactics that use negative human emotions, primarily traders' emotions, to influence the crypto community and market. Typically, FUD is used by investors who want to lower coin prices so they can buy at a lower cost.
When a vocal investor is particularly negative about cryptocurrency and blockchain technology, some crypto investors will use the term FUD. For example, Warren Buffett, the most well-known investor in the United States, has stated that he has no interest in owning Bitcoin because it is intangible and "doesn't produce anything." Some investors also point to Bitcoin's massive amounts of electricity as a reason to avoid it.
Such comments may be referred to as "FUD" by a crypto investor, who may instead encourage fellow crypto owners to maintain a positive attitude. Instead of fear, long-term crypto investors are encouraged to develop diamond hands as opposed to paper hands and "HODL" – an acronym that originally meant "hold" but now means "hold on for dear life."
A simple FUD in cryptocurrency could be, “crypto is too volatile to be used as currency.” This type of Bitcoin FUD isn't entirely incorrect, as Bitcoin is currently too volatile to be used as a reliable business currency.
Users can, however, choose not to use it as such. Spending coins frequently results in regret. Early adopters spent 10,000 BTC on two pizzas, which are now worth more than $500 million.
Is FUD real?
Cryptocurrencies and the blockchain networks that support them are relatively new technologies. As a result, they are still in development, with bugs being worked out and real-world use cases being created. Market participants betting against cryptocurrency may use FUD to instil fear in investors and encourage them to sell. Not all FUD is propaganda.
As with all new technologies, crypto as an investment is subject to wild price swings. The digital currency market, like tech stocks in general, was down significantly through early 2022. In May 2022, the S&P Cryptocurrency Broad Digital Market Index fell by up to 50%. Another significant amount of downturn in this emerging industry occurred in early 2020, 2018, and 2014, as measured by the price of the original cryptocurrency, Bitcoin.
The point is that while some FUD can be ignored, there are costs associated with investing in cryptocurrency. When an investment has significant upside potential, there is also a significant risk of steep downturns.
Because of the soaring crypto prices during the early COVID-19 pandemic, pump-and-dump schemes have reportedly been attempting to capitalize on the hype. Furthermore, as the technology improves, there will be blockchain project failures along the way, such as the rapid implosion of the Terra (CRYPTO:LUNA) blockchain in May 2022.
This emphasizes the significance of having realistic expectations for the cryptocurrency industry. Expect nothing less than a volatile, get-rich-quick experience. Therefore, maintaining a diverse portfolio of digital assets and stocks involved in blockchain and crypto tech development is critical for most retail investors.
There's no need to get hung up on FUD because digital assets are here to stay, but a healthy dose of caution will serve crypto investors well in the long run.
Impact of FUD on Users
On a personal level, crypto FUD may prompt rash decisions, similar to fears about other financial markets. For example, if a piece of news that casts doubt on the viability of cryptocurrency mining is discovered at the right time, you may be pressured to sell your holdings.
The danger of FUD in any market is as follows: FUD can influence people to make financially risky or bad decisions, whether used as a marketing strategy or because of emotional reactions to news articles lacking proper context.
This could include voting for a political candidate who does not represent your interests, liquidating your retirement funds at a loss or destroying your crypto holdings before they mature.
The most ardent cryptocurrency supporters frequently advocate ignoring FUD and "HODLing," or holding on to your holdings even if prices fall. But, unfortunately, the level of risk you are willing to take can make someone fearful. Because cryptocurrency markets are still very new and lack historical returns to support recovery expectations, advice to HODL carries just as much risk as advice to sell in uncertain times.
Why does FUD affect prices?
FUD significantly impacts the cryptocurrency market because it implies that there may be a market problem or that many investors are about to exit.
For example, China's ban on Initial Coin Offerings (ICOs) and subsequent ban on cryptocurrency exchanges signalled that millions of Chinese citizens would likely sell their cryptocurrencies due to the new regulations, making it extremely difficult to trade cryptocurrencies in the country.
Sharp price drops convey the impression that there is a problem with the market or specific items and that many buyers are about to leave. This is partly due to the parallels between sharp drops in bitcoin values and stock market crashes.
They are overwhelming for many, and when they occur, it may appear as if the market is about to collapse completely. As a result, many people sell their digital assets to avoid FUD because they cannot withstand the volatility. Many Bitcoiners and long-term crypto investors consider this a rookie move, but it still occurs and appears to occur frequently.
The History Of Fud
Fear, Uncertainty, and Doubt (FUD) is an old computer security tactic that stands for Fear, Uncertainty, and Doubt. The goal of FUD was to spread misinformation to make people doubt the safety of a particular product or technology. This would cause them to either stop using it entirely or become more hesitant, giving the person spreading the FUD an advantage.
While the term's origins are unknown, it is thought to have been first used in print by John C. Dvorak in an article for PC Magazine in 1988. Dvorak was writing about how businesses were using fear-mongering to scare people away from using products or technologies that posed a threat to their business.
The term has since been used in various contexts and has taken on a life of its own. FUD is now commonly used to describe any type of negative or fear-mongering information, regardless of its veracity. The China FUDs are among the most popular FUD phases in crypto.
On December 5th, 2013, Bloomberg, a media company with a close relationship with crypto-sceptic investment bank UBS, broke the story that China's central authority had 'barred financial institutions from handling Bitcoin transactions.'
This news came at the tail end of a bull market that saw the Bitcoin price reach a new all-time high of 1,151 dollars on December 4th, only to fall back to 178 dollars over the next year.
In December 2014, Bloomberg published an article naming Bitcoin the worst-performing asset of the year and declaring it mortally wounded.'
BTC traded sideways in 2015, then slowly recovered in 2016 before reaching a new high of $4892 on September 1, 2017.
On September 8, 2017, Chinese news outlet Caixin Global reported a new China ban, quickly picked up by Bloomberg, who reported that 'China plans to ban trading of Bitcoin on exchanges,' citing an unnamed source.
While the Chinese government was cracking down on cryptocurrency exchanges, Chinese traders switched to buying Bitcoin over the counter or moved on to peer-to-peer networks.
Furthermore, China-based centralized exchanges continued to serve foreign traders, implying that the reality on the ground was not as dramatic as the China FUD suggested.
After a 500-dollar drop at the end of the month, Bitcoin quickly recovered before going parabolic, reaching nearly $20,000 by December 2017.
When Can FUD Occur?
FUD can occur at any point during the development of a project. It could happen even after the project has been completed and launched. A competitor, for example, may attempt to spread FUD about a new product to discourage people from using it.
FUD can also be employed as a political strategy. During an election campaign, for example, a candidate may attempt to spread FUD about their opponent in order to make people less likely to vote for them.
There are various types of FUD in cryptocurrency, but the most common is pump and dump. When someone buys a large amount of a coin and spreads FUD about it, the price drops, allowing them to buy more coins at a lower price. This is considered market manipulation and is punishable by law in many countries.
The other type of FUD is when someone spreads false information about a coin or project in order to get people to sell it so they can buy it cheaper. This is also referred to as market manipulation and is illegal in many countries.
FUD Crypto Examples
Here are some of the most notable FUD Moments in cryptocurrency assets:
The birth of Facebook's cryptocurrency asset
The launch of Libra Facebook has provided an excellent opportunity for FUD in the crypto world. The rumor that Mark Zuckerberg, the owner of Facebook, was about to release his cryptocurrency instilled fear.
After the news was widely disseminated by the media last year, people's interest in crypto-assets skyrocketed, believing that the existence of such coins would be something they would require in the future.
Although some appeared to be enthusiastic about the development of Facebook's coin, others remained skeptical and concerned about the privacy of the Libra coin, which was later renamed Diem.
As a result of the privacy allegation, the world's politics were on fire on Facebook. Given the company's history of dealing with such allegations in the past, such a situation has eventually made crypto assets one of the most prominent sources of FUD.
Donald Trump's tweets on the use of cryptocurrency
Following the Facebook Libra controversy, Donald Trump, the former US President, tweeted about Bitcoin, Facebook Libra, and cryptocurrency in general, claiming they are being used to support criminals.
Although he has discussed the use of Bitcoin and other crypto assets, he has unfortunately expressed a negative opinion of them. At the same time he was expressing such an opinion, the price of Bitcoin increased.
Donald Trump's tweet is as follows: “I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air,” He also tweeted, “Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity.”
The launch of BAKKT
BAKKT is a cryptocurrency trading platform. This platform was developed by NASDAQ and became a hot topic when it was first announced in 2018.
Most crypto traders believe that institutional investors will start a new bullish movement in Bitcoin. However, when BAKKT was launched, the Bitcoin price dropped dramatically, nearly reaching 2,000 USD in a single day. Such a drop has demonstrated that the best time for FOMO can quickly turn into FUD.
The China FUD
When it was confirmed that Bitcoin's upward trend had ended, as the crypto-asset created by Satoshi Nakamoto fell to its lowest point, Xi Jinping, the President of the People's Republic of China, stated his support for blockchain. This is referred to as China FUD.
He told his people that the state should be at the forefront of developing the growing future of blockchain technology.
Big investors saw the Chinese government's support for Blockchain as an ideal opportunity to spark a fire in the Bitcoin market, causing FOMO among them and assisting the crypto asset price in rising.
The China FUD is one of the most significant periods in the history of crypto assets, affecting many crypto players.
Here are some frequently asked questions about FUD.
Who uses FUD?
The term "FUD" refers to all arguments advanced by crypto skeptics. These arguments are advanced by a variety of conventional economists and politicians.
FUDsters are the polar opposite of Twitter's astute Bitcoin and cryptocurrency supporters. Among these alleged crypto skeptics and perceived adversaries are Warren Buffet, economist Paul Krugman, and, on occasion, Elon Musk (though he has a love/hate relationship with crypto).
Why does FUD matter?
The crypto community employs FUD as part of the overall information that is priced into markets. After such negative news spreads, retail investors may be easily scared out of positions, prompting crypto derivatives traders to go short. The rest is a self-fulfilling prophecy of a correction playing out. Don't be swayed by the noise and negative information surrounding the crypto market. Ignore the FUD and always do your own research (DYOR).
What Counts as FUD?
When people share negative information about cryptocurrencies on the internet, they use the words "Fear, Uncertainty, and Doubt." As a result, the person sharing the information may be accused of spreading "FUD," or those selling an asset are doing so because of FUD. As a result, any information that creates a negative sentiment toward a crypto project qualifies as FUD.