Crypto FUD is Fear, Uncertainty and Doubt. It is a term that refers to emotional feelings in investors, usually with negative connotations, incited by competitors in relation to a certain product or brand. For the cryptocurrency, whose inner workings are still shrouded in mystery to some, these sentiments could easily be fueled by speculation and rumors on social and news media. This can lead to price fluctuations with investors buying or selling in droves. This effect tends to be more pronounced when the market is down.
In this article, we will discuss:
What is Crypto FUD?
FUD is an acronym that stands for fear, uncertainty and doubt. When the market is discussing the term FUD, it means that some kind of negative event has occurred that seems to be suspicious with major Bitcoin price movements having a big impact on the cryptocurrency market.
The source of FUD is always changing, but the impact is often the same: lower prices and a market wondering what happened and looking for something to point the finger at. Interestingly, some of the most successful investors in the history of finance believe that the FUD itself can be predicted using technical analysis, and the news cycle is part of the general cycle of human behavior that the study of price patterns is actually examining. For example, Bernard Baruch, once one of the richest men in America, was quoted as saying, "Show me the charts and I'll give you the news."
What causes Crypto FUD?
There are two main reasons why crypto FUD occurs. It could be due specifically to the targeting of a certain coin or project credibility, causing its price to fall or undermining the viability of cryptocurrency as an asset class to impact investment value. While skepticism isn't surprising when it comes to new technologies like cryptocurrency and blockchain, a lack of understanding in the technology – coupled with the media's negative portrayal of connections to illegal money laundering activities and massive energy consumption – can easily turn public skepticism into cynicism. For example, the 17-hour outage on the Solana network in 2021 generated significant FUD, especially around its technology and security features. [Editor's note: Recent Solana outages also exemplify the FUD that can result from ongoing technology issues.
This negativity towards cryptocurrency bodes well for centralized financial institutions, which may view the decentralized aspects of cryptocurrency as a threat to established systems. This may be the reason why some governments, such as China, are adamant about banning cryptocurrencies, which further exacerbates cryptocurrency FUD. In addition to media portrayals and government positions, FUD can also take place on a micro level – for example, through social media posts from an investment influencer about reasons why cryptocurrency is simply not for them, or why that certain currencies may have problems in the long run.
Who uses FUD and why?
FUD is used by the crypto community as part of the general information that is priced in the markets. Retail investors can get spooked by positions easily after such negative news comes out, which leads cryptocurrency derivatives traders to go short and the rest is a self-fulfilling prophecy of an ongoing correction.
Conspiracy theorists believe that whales and the elite and the rich are often behind the spread of FUD in an effort to negatively impact the value of Bitcoin or cryptocurrency, and they use this as part of a devious strategy. FUD is important because new investors are easily shaken up and it causes prices to drop for long-term holders and the average crypto enthusiast with strong hands.
Crypto FUD effects
When FUD is based purely on speculation and unfounded rumors, it usually does not result in any long-term impact on cryptocurrency investment values. Even if it is widespread enough to cause the price of a currency to fall, the value usually recovers in a short time. For example, when China announced its intention to clamp down on cryptocurrency harder with a new ban, Bitcoin prices were only briefly affected before recovering within a day.
Thus, while less informed investors may make hasty decisions to sell their coins out of fear, astute investors may buy these coins at reduced prices, believing that the dip is only temporary, thus strengthening the resilience of the currency and the market. cryptocurrency market.Such blatant negativity may strengthen the support of those who trust and appreciate the decentralized nature of cryptocurrency and blockchain, believing that it's the answer to existing centralized financial systems — and the future of financial transactions. come any way and from anywhere.
This can result in financially bad decisions made by more anxious and less experienced investors. While many may advise HODL and hold their coins even during a price drop, it is important to keep in mind that cryptocurrency markets are still relatively young and volatile, without sufficient historical evidence of consistent returns to predict a recovery. The key is therefore to rationally consider all the information and updates you are receiving from various sources on a currency or crypto asset before making an investment decision, rather than succumbing to FUD with panic selling.
FUD in the context of the cryptocurrency market
FUD is especially powerful in the cryptocurrency market because Bitcoin currency is still a speculative asset, and each altcoin is even more so. speculative at this stage. This means that these assets are highly volatile, making assigning a value even more challenging, and therefore price swings can be dramatic against information that is often nothing or, often, outright false information.
Cryptocurrency FUD Examples
The problem with the term “FUD” is that it is often used incorrectly or applied so broadly that it is difficult to always understand what FUD is and what should be considered FUD. There are also many sub-categories of FUD, each technically defining as fear, uncertainty, and doubt. Here are the various types of FUD commonly found in the cryptocurrency industry and the individual themes within each category.
common FUD
This type of classic FUD are the most basic examples of FUD because they are used so often, mostly incorrectly, to prove to others why Bitcoin and other cryptocurrencies are a bad thing.
- Bitcoin is used by criminals – All money is used for crime, but Bitcoin is usually blamed for the worst acts because it is often directly linked to ransomware attacks and users often try to avoid taxes using cryptocurrencies. However, US dollars in general are much more used for crimes than cryptocurrencies. In fact, $100 bills are often used to snort cocaine, an illegal drug. This is impossible with Bitcoin.
- Too Volatile To Use As Currency – This form of Bitcoin FUD is not entirely wrong as Bitcoin is currently too volatile to reliably be used as a currency for businesses. However, users can use it as such, but choose not to. Spending coins often leads to regret. Early users spent 10.000 BTC on two pizzas, which would be worth over half a billion dollars.
- No Intrinsic Value – As Bitcoin is not a tangible asset that individuals can physically see and hold, they generally cannot associate it with value and scarcity like gold. They also know that it is not backed by another asset like gold, oil or even government military power like fiat currency. However, these FUDsters are forgetting the value of the underlying blockchain network and the effect of the network.
FUD technology
This type of FUD is most closely associated with the technology itself. All technologies have pain points. The internet, for example, has led to widespread privacy issues. But it is one of the most empowering technologies in history, allowing humanity to enter the digital age.
- Bitcoin is bad for the environment – In theory, Bitcoin is bad for the environment because it requires a lot of energy to power. It takes more energy than many small countries to keep the Bitcoin network running. However, Bitcoin miners are recently relying on greener and renewable energy sources and are working towards a completely renewable industry.
- Coins are easily lost – This is another type of FUD that is technically true, but with a little foresight and preparation, it can be eliminated completely. Bitcoin's core code makes it so that there are only 21 million BTC. Millions are said to be lost, however, due to BTC being sent to an incorrect address, users losing access to their wallets and private keys, users dying without passing on assets to relatives, and more. But now it is much easier to securely store crypto assets. Just remember to make a plan to pass your possessions on to your loved ones in case of any tragic situation.
- Bitcoin is very slow – Bitcoin is really slow compared to most other cryptocurrencies. But what changed in speed, came back in safety. As a cryptocurrency designed to be the global settlement layer for all finance, security was a must over speed. Second-tier technology like Lightning is making this argument obsolete.
Regulatory FUD
Regulatory FUD is the worst type of FUD because governments are serious and most of the time users must comply with the restrictions of the borders they live on. These borderless technologies and currencies are still bound by the rules by which the users themselves live. Governments use this to their advantage and against cryptocurrencies, often because Bitcoin and other cryptocurrencies pose a threat to the fiat currencies they rely on to control citizens and businesses that operate there.
- Government Bans – At any time, a government can ban Bitcoin and cause users in their country to panic and sell as quickly as possible to get out before it’s too late. China’s recent FUD saw the country ban Bitcoin mining for the first time, which turned out to be positive for the cryptocurrency. Not satisfied, China has also banned cryptocurrencies in general, but is now trying to unban them.
- Tax Law Changes – Taxes are already extremely complicated for cryptocurrency investors and traders, who treat coins as if they were property. This is another reason why they still cannot realistically be used as currency to pay for goods or services, as each time a person does so, it would cause a taxable event and the need to pay capital gains tax if any gain were to be paid. obtained.
Miscellaneous FUD
This type of FUD does not fit into the other categories and has so much variety that it needed a more general statement like “miscellaneous” to properly convey what the category is about.
- Celebrity Influence and Control – Certain types of influencers, or celebrities in the cryptocurrency market – even real-world celebrities we see on TV and in the news, can use FUD to manipulate and pump and dump the markets. Celebrities from Elon Musk Kim Kardashian West have been involved in some type of controversy or scheme involving cryptocurrencies.
- Quantum Computing – Cryptocurrencies are cryptographically protected by complex mathematical keys. The problem here is that certain types of computers are on the way that can easily crack these mathematical codes and access the assets that are protected behind the encryption.
- Solar Storms – Now the FUD is really getting weird, but it's a possibility that people dread. Even Deutsche Bank warns that a massive solar storm could send electromagnetic waves toward Earth that topple power grids and, with it, the internet and all blockchains. What good are digital assets if you can't access the internet or even electricity? How would the network continue to function?
Conclusion
FUD often leads to significant price drops, causing many people to temporarily lose money, but FUD also creates opportunities. . Patient enough to wait for the FUD.
After a price drop caused by FUD, buying a cryptocurrency is like buying a stock after a significant market drop. Many stock investors see a stock market crash as a kind of “sale,” a limited-time opportunity to buy stocks at a discounted price. On the other hand, it can be challenging to calculate FUD cycle time accurately. It is because it is not always clear where the bottom of the cryptocurrency price drop due to FUD is.
