What is FUD
FUD is an abbreviation for “Fear, Uncertainty and Doubt”, which translates as “Fear, Uncertainty and Doubt” in Russian. Generally, FUD is defined as any information that is interpreted negatively by investors and leads to a bearish trend in the market. But FUD has other interpretations.
Sometimes the term is used to refer to the bearish trend itself, which results from the skepticism of some major or well-known participants in the crypto industry. Sometimes you can find a derivative of the FUD term FUDsters, which is essentially identical to the Russian cryptoskeptics. It is most often used against those who say that cryptocurrency is dubious, worthless and things like that.
While FUD can have different uses, one thing is constant – the term unequivocally carries a negative connotation towards cryptocurrencies: temporary or permanent.
The impact of FUD on investors
Most investors, oddly enough, invest on a hunch. If everyone had a professional approach to the issue, we’d be rich. And then someone famous says something catchy, and everyone runs to sell or buy, depending on what is proclaimed. For example, the notorious Peter Schiff called for a bitcoin sell-off on March 11, 2023. Surely someone followed the advice due to the charisma and fame of the cryptoskeptic. However in fact, March 11 was the last day bitcoin traded below $20 000, and its value is above $29 000 on July 26.
The most dangerous thing for inexperienced investors in such cases is to run into a situation where the FUD matched the reality of the situation. Then people begin to believe: the one who spoke out against cryptocurrencies is really a guru and prophet, and his mistakes are beyond reality. In reality, the guru was just lucky. Always look at the reasoning, more often than not supposed experts do without it.
The impact of FUD on the value of cryptocurrencies
FUD primarily sows doubt in the minds of investors. This could subsequently lead to a local bearish trend emerging. More often in cryptocurrencies with smaller capitalization, but happens in large coins as well.
The clearest example of FUD is the People’s Bank of China’s September 2017 ban on ICOs in the Middle Kingdom. This caused some excitement among investors who rushed to close their positions. Which ultimately led to a 8.62% drop in bitcoin quotations in September 2017 (Bitstamp exchange data).
Source: tradingview.com
I guess those who sold BTC at that time must have regretted it later, as it was worth four times its value just three months later. But the point is that negative information has led to sell-offs on a one-off basis. Although if you think about it, banning ICOs in one country is a drop in the ocean for an entire industry. Which was proved by further growth of quotations BTC.
And what is the correct way to interpret FUD when trading cryptocurrency?
FUD control
The most important thing to do is to do your own analysis: fundamental and technical analysis. You can’t rely on official statements from even very popular personalities. For example, popular US TV host Jim Cramer (Jim Cramer) has recently often spoken out against cryptocurrencies. At the same time, he himself admitted that at one time he made money on bitcoin, and after that he held ether. If you know this information about Kramer, you should obviously have questions about the consistency of the statements with the actions.
Another example: Warren Buffett.. Legendary investor believes cryptocurrencies are not the place to invest in. But he was of a similar opinion about gold. His investment company Berkshire Hathaway ended up investing in shares of Canadian gold miner Barrick Gold. And while we haven’t heard anything about Buffett’s investments in cryptocurrencies, it’s safe to assume that the famous investor will change his tune here, too.
Plus often the proliferation of FUD can cause cryptocurrency to fall in price, making it an opportunity to buy in at more attractive prices.
Filter the information you receive. Favor expertise that is based on statistics and facts. For example, there are analytical portals like Messari,
Glassnode,
Coinglass and others that support their conclusions with data. Yes, you should not rely entirely on this data, but the opinions of such analysts are much more reasoned than simply saying that bitcoin is worthless.
Thus, FUD is negative information regarding cryptocurrencies, which can be based on both real facts and unsupported facts. It can lead to panic among investors and, as a result, to a decrease in the value of individual coins. You should not rely entirely on FUD: you should do your own analysis.